WHAT TO DO?

Jennie | Apr 25, 2016 | 13 posts since 2010

I have $250,000 in CD's that just matured and another $250,000 maturing in a couple of months and another $500,000 maturing next year. I was averaging 3.5%. Now, I am looking at Melrose CU and the 2.42% 5 year CD. I learned the downside is not only the180 day penalty but a rate reduction to 0.5%.

I would not break the CD unless interest rates increased considerably. I am 81 and have enough funds to last as long as I will, but not having the "glass ball" is frustrating. Maybe I should play it safe and go for Ally Bank even though the interest rate is less. Anyone have any thoughts or suggestions? I am a widow so must make all of my own decisions.

If I should get in a tight for money I can buy a house or two for cash and sell them and hold the mortgages and get some more income that way. Thanks for any thoughts on this.

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Answers

alan1 | Apr 25, 2016 | 876 posts since 2015

In addition to the very high penalty, Melrose is in real bad financial shape -- for more info, check Bauer Financial, bankrate, and this website. Also, they do not have a good reputation re customer service.

Jennie | Apr 25, 2016 | 13 posts since 2010

Thank you for your post. I will stay away from Melrose. I just found the EWPC and the How to Grow Your Money Safely on this website so that will give me considerable help. I am thinking to go with 5 year CDs with the lowest EWP instead of a 1 or 2 year CD hoping that we get a boost in interest rates in the next year or two.

SeeKey | May 8, 2016 | 1 posts since 2016

Jennie: I read all the replies and the bottom line is do what you had been doing. Don't change a bit.

Jennie | May 9, 2016 | 13 posts since 2010

SeeKey, So you think 5 year CDs with a 5 or 6 month EWR and be worry free. If I live to be 100 I am okay with my income, principal and interest, even if small. Health is wealth and I want limit worry and stress. I can see I am just where I started on April 25th but all the posts and suggestions have helped me clarify my thinking. Thank you all.

Inflation_Hawk | May 9, 2016 | 107 posts since 2016

With at least a million bucks at age 81, just put your money in laddered CD's. There's no reason to take any risks to get a greater return. Do the math. If you spend 50K a year you won't be broke until you're 101! And, that's not counting Social Security or whatever assets that you may have (like a house).

Ricochet | Apr 25, 2016 | 522 posts since 2010

Hi Jennie
Just to focus the replies a bit. Do you intend to leave funds to heirs?

Jennie | Apr 25, 2016 | 13 posts since 2010

Hi Ricochet,
No, I plan to leave what is left to MD Anderson Cancer Center who treated my husband for 10 years. My house has no mortgage, my car is paid for. I mostly spend money for traveling which I intend to do as long as I can. It is important to me to be able to get my interest if I need it. So that is pretty much how it is. Thanks for any suggestions or information you can give me.

Anon456 | Apr 26, 2016 | 249 posts since 2011

Just a suggestion. I THINK the rates are in a pause, but would NOT go out 5 years. I am taking the best 2-3 year CDs I can. I might do a 1.5% for 18 months or less, but have been doing 2% in 2-3 years until just now.

Park the money, but maybe even do very short term CDs. Don't be afraid to break down to lower amounts and do some laddering. Does NOT take that much effort to open or keep up with them.

I would even consider a stock ETF like XLE for a portion. Has a decent dividend. I like utilities as well, but they are a bit too high. If you know a good BOND broker, take some in high quality muni-bonds out 4-8 years and DO NOT pay over PAR. Buy individual bonds, NOT FUNDS.

At least, those are things I am doing. AND I am Very conservative.

(FYI - if much of it is intended to pass via your WILL .... DO consider some stock equities. If they have a gain, and you pass them on, any gain will NOT be taxed but will enjoy the STEP UP basis advantage in the tax code. But stay very conservative like Blue Chip or ETF and amounts you will not need to touch for 5 years or longer).

Barabbas | Apr 27, 2016 | 9 posts since 2016

Wow, terrible advice. Why invest in a single sector? XLE has been getting hammered. Diversification is the only guaranteed "free lunch" in investing. Put your money in a target date fund and forget about it.

Jennie | Apr 27, 2016 | 13 posts since 2010

Barabbas, I liked your suggestion so I checked on-line for Vanguard Target funds for retirees. It looks like a possibility so I'll call Vanguard to see what they think. I want to make as much as possible but capital preservation is my highest priority. My income is SS, Interest on CDs and the annual RMD. So interest is important but an extra point won't change my lifestyle. Thanks for your suggestions.

Jennie | Apr 28, 2016 | 13 posts since 2010

All of it in a Target Date Fund?

Jennie | Apr 27, 2016 | 13 posts since 2010

Anon456, Thanks for your suggestions. I was thinking 5 year CD and closing it if interest rates increased in the next couple of years. But, to keep things simple and because banks and credit unions have changed the rules in the middle of the game (Valor), I will stay with short term CDs. As for any stocks or bonds I will check them out. I appreciate your taking the time to help me and you did.

Anon456 | Apr 28, 2016 | 249 posts since 2011

Note - Barabbas is right. I only mentioned XLE as an option for a portion of the funds - maybe 10-20K, and be prepared to sit it out for a while. But it pays well while you wait. You may just want to park the majority of funds in money market or very short term cds because rates are most likely going to change soon, or at least you may find someone running a special. Of your $1M to re-invest, having 5-10% in equities is, in my opinion, a good option for you. Others may suggest larger amounts (if you can sleep with the volatility), but I am a very conservative investor and do mostly fixed income.

DO NOT be afraid to DO NOTHING, such as just a money market under FDIC amounts for the short term. I think we are at the bottom of this interest rate desert.

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