Has Anyone Given Up The CD GAME?

Diehard | Jan 27, 2019 | 113 posts since 2018

For the *average* folks, (not you millionaires) who may only have 10k to 20k to put in a CD, does it make any sense to even invest at these ridiculous low rates? Example: A popular credit union is offering 3.20% for 17 months. WOW, I said to my (old) self! That sounds good!

Then I ran the numbers. :( My $10,000 deposit will only make $463 after 17 months. LOL!! Who are we kidding! That's very discouraging, and probably even more so for young people just starting out. Unless we see some yields paying 10% soon, (NEVER!), I'm very hesitant to add any new money to CDs. Doesn't make much sense to tie up money at these stupid low yields.

I'm going to change my username....

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Answers

paoli2 | Jan 27, 2019 | 2,641 posts since 2011

Not me! We were in CDs when we were getting 12% and more and had the good sense to keep with them when they dropped to 2%. I always decide how much extra I need to get in to keep our bills paid and always look for the bank or credit union which can give me the rate I need. I would rather have 2% of a sure thing than 8% of something that can cost us the savings which took years to build up. As long as I don't have to eat into the principal, I will ride the CD boat as long as I can to keep myself and family financially safe and stable. But I know many would not agree with my way of doing things and that's why many have tipped their toes into riskier investments.

Diehard | Jan 27, 2019 | 113 posts since 2018

No doubt, CDs are a nice safe place to park savings. I was done with stock mutual funds as soon as I retired, 10 years ago. I hated all the ups & downs, and large swings in my account balance. Sure, the market has done better the last few years, but I still hate Wallstreet and the stock market.

So now it's all CDs, or bust. I'm very conservative, and in preservation mode. And I'm no big money man. I don't have hundreds of thousands to deposit. But it sure is depressing when putting 20,000 dollars into a CD, and only earning about $900 in interest!? After the 2% inflation, and paying taxes, most of my interest earned is ate up. I just wonder if it's even worth it to be locking up money.

Diehard | Jan 28, 2019 | 113 posts since 2018

Well, the old guy will bow out of this thread now. Appreciate all the replies & comments. Yeah, I wish savings rates were higher for my meager little accounts. But like RJM said, all the gripes and bellyaching won't change a darn thing!

And of course, there's much more to life than just sitting around and worrying about stinkin money. I'm bessed with a nice inflation-adjusted pension, and I also draw social security now. I'm very frugal, debt free, and those two modest incomes meet my simple needs, easily. I have MUCH to be thankful for. Thank you God!
Take care everyone.

Saver5 | Jan 27, 2019 | 27 posts since 2015

Principal invested in a CD issued by an FDIC or NCUA-insured institution is guaranteed up to $250,000. One can lose some or all of one's principal in other investments. So for money you can't afford to lose, CDs are great. Any rate above the current annualized inflation rate (currently 1.9%) means you are doing better than inflation. Of course, taxes are due on the interest income.

Diehard | Jan 27, 2019 | 113 posts since 2018

It's just sad. Especially for older people, seniors, the elderly. The highest 5-yr yield I see on this website is 3.63%? That is absolutely pathetic. And just think, that's one of the highest CD rates we've seen in the last 10 years?? I don't know if I should be laughing, or crying. And some rates are already dropping a bit. A sad time for "savers."

I think I will change my username to "LowYield." :-)))

Ally6770 | Jan 29, 2019 | 4,294 posts since 2010

We were chasing rates since the 70's and it has allowed us to pay off 2 houses ( built the 2nd one) and pay cash for the third and we have been gifting to the children since the 90's. My husband was put on disability in 1995. We never made over $59,000. Chasing rates did us just fine. We were in the market for 4 years and that was enough for me. No reason to be making that much money (20% - 40%) when the balance sheets of the companies were not any better. It was all momentum buying. I got out and never went back. I like putting my head on the pillow at night and know I have enough to live on and to gift the children every year and will be able to leave them a nice inheritance and I always will be grateful for the CD's rates and guaranteed funds. We were able to sell the houses and gift the money to the children.

Diehard | Jan 29, 2019 | 113 posts since 2018

Yep, those were the days, Ally! After my dad passed, I was going through all his paperwork, and came across old bank statements. He had CDs and Treasury Bonds yielding 11% and up? I think a couple were 15%.

I guess all those high rates meant the economy was screwed up somehow? I'm not smart enough to understand the economics of it. I also recall the long gas lines.... in the Carter era? Anyway, it was a good time for savers and CD buyers I guess.

Ally6770 | Jan 29, 2019 | 4,294 posts since 2010

We had those rates. In fact I remember typing up a $100,000 CD for 15% in the 80's..
We had high inflation during that time and you were not making near or double the rate of inflation as the 4.2% CD at Achieva has been making.

RJM | Jan 28, 2019 | 499 posts since 2011

The smaller amounts you have, the less it makes sense to chase rates.

But many of us are dealing with larger amounts than $10-20k.

If you are only buying $10k CDs the difference between 3.20% and 3% is just $1.67 a month.

But, if you are young, you probably should be in stocks for the long term. I sure would not have retired young if I was buying CDs when I was young.

Diehard | Jan 28, 2019 | 113 posts since 2018

You are right RJM. Doesn't do much good to gripe. As they say in the 'hood.... "It is what it is." But it sure would be nice to see a steady 5% savings yield somewhere. But then again, I'm an old guy with only small modest amounts to deposit. And I agree that there is no need to be chasing rates all over the country.

Back to the farm....

Ricochet | Jan 28, 2019 | 522 posts since 2010

Ha Ha HY
Hydroponic Farming can be relaxing, (if you have the patience) and can be profitable if you have the right kind of seed.

Ratesaver | Feb 3, 2019 | 187 posts since 2013

I wood never think of giving up cds as one might look at the options... Putting money in the market that is going crazy is not a option . I have thanks to Ken and this site been able to do well for quite a long time... Over 65 is not a option to change now... I hope it even gets better... Penfed rates are a quick reminder that you can't depend on any bank or credit Union … I won't give up

paoli2 | Feb 3, 2019 | 2,641 posts since 2011

Good for you, Ratesaver! Stay the course and if you do your homework, you can always find that bank or credit union with a better rate.

One thing I would like to share with our readers is that I thought I left Chase Bank to go to a better "bank". I have had such battles with their so called "banker" and mistakes made on my account! I decided to do some research on the personal and professional experience of their employees. I was shocked to find out my so called "bank" is basically a brokerage and their bankers are really investment brokers for the types of investments I won't touch!

They get these people from non-bank backgrounds and just turn them into commission selling salesmen or women for those type of investments. It's no wonder I know more about actual CDs and banking products than they do! I think the days of the old type real bank as we knew it are quickly coming to an end.

My real concern is for the elderly folks who can be easily convinced these riskier products are the way to make more money and can end up with real financial problems before they leave this earth and their children may end up with no inheritance. Just see if you can find a real old fashion bank in your city which makes old fashioned CDs, savings accounts etc. their main products. At least when we deal with Vanguard or Fidelity, we know going in what their expertise is in and they even throw selling CDs in for those of us who want the choice. I find banks more sneaky about what they are really doing. Just my opinion. Find out for yourself.

jeffb1517 | Apr 24, 2019 | 10 posts since 2019

FWIW back when Chase was Drexel, Morgan & Co (1871) it was a merchant bank. Chase has always been primarily an investment bank not just a bank that concentrates on simply community borrowing and lending in safe investments. They were a "gold bank" back when the more common type of bank you are talking about were "silver banks".

Ally6770 | Jan 27, 2019 | 4,294 posts since 2010

The S&P 500 has gained 6.73% over the last 30 years whereas the average investor saw a return of 3.6%. (From seeking alpha.)
This was published in Oct of 2018. Wonder what the figures would be now.
https://seekingalpha.com/article/4213151-investing-environment-inaccurate-indexes-investor-fear

RJM | Jan 28, 2019 | 499 posts since 2011

I outperformed the heck out of that when I was younger. Then I got too conservative, have too much in cash & cds and don't take the risks I should.

I see no point in belly aching about low rates. If a million of us scream as loud as we can, it's not going to change a thing.

And if a higher yield with higher inflation really any better?

Im confident I could do significantly better in real estate, but I don't want the headaches. Which means I am lazy. And lazy people never do as well as the more industrious.

Or maybe I just need to increase my caffeine intake? LOL

paoli2 | Jan 28, 2019 | 2,641 posts since 2011

Isn't the idea to save as much as we can while we are young so that we don't have to spend our later years being so concerned about chasing rates? If you are of a mine, you can find higher rates but you have to send your money all over the country and make sure that bank or cu has an excellent rating. I did that for years but now it is time to bring the "family" back home to live and be grateful I have a "family" to bring home! If we didn't do our due diligence when we were younger then we are just howling to a very distant moon now.

Diehard | Jan 28, 2019 | 113 posts since 2018

True, paoli2. I'm all for saving! But I think it depends on how much money a person makes. During my working years, I put 10-20% of every paycheck into a 401k and an IRA. But I was working at jobs that paid very modest wages, so my contributions were smaller amounts.

But hey, at least I PUT something into investments & savings! I know relatives and friends in their 50s & 60s who don't have any savings at all. They just live for "today."
Anyway, back to my point, these low pathetic interest rates STINK! (And I have some of the better-yielding CDs.) I don't know much about economics, but all the savers out there are getting screwed! And have been for 10 or 12 years! And at 65 years old, I ain't taking on risk, or going anywhere near the stock market.

"It is what it is." Let's be happy with 3 or 3.6%, because I'm sure rates will be declining again in the near future. I look forward each month to my 20 bucks of interest. LOL!!!!! McDonald's, here I come.

AnnO | Jan 28, 2019 | 129 posts since 2018

"now it is time to bring the "family" back home to live and be grateful I have a "family" to bring home!"

Nice. :-) The homecoming of your 'money family' will benefit any 'people family' who may eventually have to sort through everything. It can take months even with decent records.

RichardW | Jan 29, 2019 | 810 posts since 2019

Ally6770, I don’t know where the author of the seeking alpha article obtained the 6.73% S&P 500 result. The result seemed a little low, so I checked one of the online calculators (https://dqydj.com/sp-500-return-calculator/) which I frequently utilize for S&P 500 comparisons like this. If you select a time period from October 1988 to October 2018, the results, not including inflation, are 7.99% (and 10.31% if dividends are reinvested, which is a very common practice for many investors). Even if you repeat the calculation including inflation, the numbers don’t agree with the seeking alpha article. I am not sure that the results from this online calculator are the most accurate that can be found…most likely if you checked 5 other sources you might discover 5 different results!

xllmmv | Jan 28, 2019 | 2 posts since 2012

Well, the rate has to do with a bunch of factors like inflation and bank load rate. If suppose the mortgage interest is at 15% and lots of people are into it, then those banks can offer CD at 10% then pocket the difference as profit.

Diehard | Jan 29, 2019 | 113 posts since 2018

One last thing..... So, if an older person (65 and up) only has 10k-20k available, where do you good folks suggest he/she park it? Let's assume it won't be needed anytime soon.

cddeals | Jan 29, 2019 | 3 posts since 2010

In an online savings account paying 2.2% interest.

AnnO | Jan 29, 2019 | 129 posts since 2018

All America Bank = 2.5% for up to $50k. https://www.depositaccounts.com/banks/america-bank/offers/

Then keep watching this site's blog posts for the next 4%+ CD you're eligible for.

paoli2 | Feb 3, 2019 | 2,641 posts since 2011

I would go for the highest rate within a CD or money market account and make sure the CD has the least EWP on it for "just in case" I needed some of the money before it matured. With that small a savings, I would want to get as much interest as possible with the least risk.

Diehard | Feb 3, 2019 | 113 posts since 2018

I thought this thread had died. Thanks very much to all those who posted more replies.

I realize now that I have been way too rigid with myself, way too set in my (old) ways, too loyal to just one credit union, and unfairly (and stupidly!) critical of those who frequently pursue higher rates... wherever they can find them.

Thanks for helping this old man. I'm now a "player!" :-)

Ally6770 | Feb 3, 2019 | 4,294 posts since 2010

I would put it in the highest rate CD that you could find. Most credit unions will let you
take the interest out with no penalty if you need it. Check it out.
If you think you might need principal go for the highest rate savings account or money market you can find.

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