Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
You must not have done any research into long term effects of inflation if you think this way. In a normal inflation cycle even if you didn't spend a single penny that $100K would be worth $22.53K by the time your 95. Here's another way to look at it: Based on your strategy someone can draw $4,050/yr per $100K on their 95th Bday. If they had $1 million in the bank (which the majority won't) they will be able to draw $40,500 on that 95th Bday. Which will be the equivalent of only $9,124! Even the most frugal person would shudder in horror imagining how they could live on $9K/yr at 95 years of age. The "keep it in the bank" strategy is one of the worst ways to hold on to your money that's meant to last you a lifetime.
Normally, bank interest rates stay above inflation. Since 2008 interest has been kept artificially low, supposedly to stimulate the economy. Inflation is low now, but interest is even lower.
The current situation is not normal. If inflation increases, eventually interest rates, and therefore savings bank interest, will increase.
You will not see 4% inflation with 1% savings account, or CD, interest.
Normally, bank interest rates stay above inflation. Since 2008 interest has been kept artificially low, supposedly to stimulate the economy. Inflation is low now, but interest is even lower.
The current situation is not normal. If inflation increases, eventually interest rates, and therefore savings bank interest, will increase.
You will not see 4% inflation with 1% savings account, or CD, interest.
Sure why not? If you buy a 10 year CD at 1.5% you will. One of the proud folks are those who got 10 CD's at high interest rates in 2008 ish and are still getting those higher rates. However if you got one a couple of years ago at say 2.5% it is still looking good. But for how much longer. It is all part of investment decision making.
Sure why not? If you buy a 10 year CD at 1.5% you will. One of the proud folks are those who got 10 CD's at high interest rates in 2008 ish and are still getting those higher rates. However if you got one a couple of years ago at say 2.5% it is still looking good. But for how much longer. It is all part of investment decision making.
It would not be a good idea to buy a 10 year CD now.
Article in this morning's Los Angeles Times business section about the dismal results of the CalPERS portfolio over the past year - less than one percent! CalPERS is the largest public pension fund in the United States. So if that's all the result these highly paid professionals can get, it sure makes you wonder.
CalPers would have been better off Investing all their booty in the S&P 500. It is Warren Buffet's favorite mutual fund. Advisors use it as the benchmark to beat and they rarely do.
A group of us retired folks were sitting at the pool and the conversation turned to retirement and money. A number of the group said they had pulled out of the stock market and now have ALL their money in cash. (Money Market, CD, Checking Accounts, etc.) They said it allowed them to sleep at night.
Mine is in cash.
Quote:
I said that was short sighted because inflation would force them to pull out more and more money every year to support their lifestyle and they would lose money every year just playing it safe and putting all their money in cash. They needed to take some risk to allow their money to grow to cover inflation and future needs. They would not consider my argument. Is this thinking common?
My income supports my lifestyle, and I still have money leftover for regular contributions to charity and some to put into the bank. I have very simple tastes and lifestyle.
CalPers would have been better off Investing all their booty in the S&P 500. It is Warren Buffet's favorite mutual fund. Advisors use it as the benchmark to beat and they rarely do.
Which is exactly what I have done. Averaging just over 10 percent per year even with the 32 percent drop in 2008. Made all of that back and then some.
All in cash is very extreme and let me tell you, I wouldn't sleep well at night! There's no reason I can think of to not have at least 30% in stocks...0% is just...paranoid / anxious / irrational but if it works for you, whatever.
My investment adviser is ridiculously expensive but I figure as long as he makes me money which he usually does, what do I care what he charges.
I was a hourly employee all my life and am the poorest person you ever heard of who has a investment adviser but I highly recommend it if you have any savings at all/
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.