CD or invest?

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Topic Author
Boilermaker10
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CD or invest?

Post by Boilermaker10 » Sat Oct 12, 2019 9:28 am

Here is the situation.

78 and 84 year old couple in good health. Currently have 120k per year income between social security, pension, and farm income. Annual spend is about 50k.

Have 250k in CDs maturing, wondering if they should put back into CDs @ 2.6% for 3 years, or to put in wellington or Wellesley.

Current investments:
600K in CDs/cash
650k in Trad IRA all in Wellington
250k in taxable investments mainly in Wellington
1.6 million in farmland at current value.

Current income:
Pension of 3k per month
Social security 3k per month between the 2
Farmland throws off about 44k per year of income.

The RMDs from the Trad IRA is just being moved to taxable still invested in Wellington.

Farmland will not be sold as it will be passed down to kids to get step up in basis as there are huge capital gains.

Looks like longest peak to back even for Wellesley is 2 years and Wellington is 3. So if they invested at the peak, it would be 2 years to get back to even with Wellesley.

Would you put the money back into CDs or put in Wellesley or Wellington? They do not need the money as their pension/social security and farmland almost double their expenses. So basically should they take on a little more risk to grow their wealth since they really don’t need it?

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RickBoglehead
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Re: CD or invest?

Post by RickBoglehead » Sat Oct 12, 2019 9:33 am

$1.5 million, of which 60% is invested in Wellington, which is 65/35. So that puts them at 40% stock, 60% bond. Given what you stated, no more investment in the stock market should happen at that age IMO. CDs.

Discussions of peaks and when they are is market timing, and this forum focuses on long term investing.
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SteelCityMD
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Re: CD or invest?

Post by SteelCityMD » Sat Oct 12, 2019 9:35 am

How stable is the farm income? Is it passive or do they work for it (i.e. is it going away soon?)

Either way they seem fine on pension and SS alone.

It may make sense to consider some of this money for future generations.

SteelCityMD
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Re: CD or invest?

Post by SteelCityMD » Sat Oct 12, 2019 9:35 am

Duplicate post

Topic Author
Boilermaker10
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Re: CD or invest?

Post by Boilermaker10 » Sat Oct 12, 2019 9:41 am

SteelCityMD wrote:
Sat Oct 12, 2019 9:35 am
How stable is the farm income? Is it passive or do they work for it (i.e. is it going away soon?)

Either way they seem fine on pension and SS alone.

It may make sense to consider some of this money for future generations.
Passive and stable. Yes this would mainly be thinking about future generations because they should not need the money theoretically

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Cyclesafe
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Re: CD or invest?

Post by Cyclesafe » Sat Oct 12, 2019 9:49 am

I'd look at cash possibly needed for financing future dotage. These funds, if invested in equity, may face a mini sequence of returns issue. Good health is ethereal for us all.
"Plans are useless; planning is indispensable.” - Dwight Eisenhower

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RickBoglehead
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Re: CD or invest?

Post by RickBoglehead » Sat Oct 12, 2019 9:59 am

Assisted living costs roughly $4,500 a month per person. Skilled Nursing can cost $100,000 per person per year.
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Topic Author
Boilermaker10
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Re: CD or invest?

Post by Boilermaker10 » Sat Oct 12, 2019 10:37 am

RickBoglehead wrote:
Sat Oct 12, 2019 9:33 am
$1.5 million, of which 60% is invested in Wellington, which is 65/35. So that puts them at 40% stock, 60% bond. Given what you stated, no more investment in the stock market should happen at that age IMO. CDs.

Discussions of peaks and when they are is market timing, and this forum focuses on long term investing.
Not trying to market time, was just comparing peak to getting back to even as the worst case scenario. If put in these funds the worst case scenarios is it takes 2-3 years to get back to even. Where the cd would never fall below even

gr7070
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Re: CD or invest?

Post by gr7070 » Sat Oct 12, 2019 12:30 pm

120k income.
50k expenses.
Tons of cash.
Expecting to not even need the farm equity.

I'd easily put it into Wellington at minimum risk, would consider even Total Stock Market or other Vanguard all-in-one funds.

What are they'd doing with the excess income?

Roth IRA an option due to farm income?

Flyer24
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Re: CD or invest?

Post by Flyer24 » Sat Oct 12, 2019 12:42 pm

Topic moved to Personal Investments.

Topic Author
Boilermaker10
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Joined: Fri Mar 22, 2019 8:53 pm

Re: CD or invest?

Post by Boilermaker10 » Sat Oct 12, 2019 7:16 pm

gr7070 wrote:
Sat Oct 12, 2019 12:30 pm
120k income.
50k expenses.
Tons of cash.
Expecting to not even need the farm equity.

I'd easily put it into Wellington at minimum risk, would consider even Total Stock Market or other Vanguard all-in-one funds.

What are they'd doing with the excess income?

Roth IRA an option due to farm income?
Excess income has been getting stuck in cash/cds. Roth IRA I believe would be an option with farm income, not something I had thought about

gr7070
Posts: 402
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Re: CD or invest?

Post by gr7070 » Sat Oct 12, 2019 7:30 pm

They could get more tax efficient, too. Depending upon their knowledge, desire.

HomeStretch
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Re: CD or invest?

Post by HomeStretch » Sat Oct 12, 2019 7:37 pm

Agree that it should go into fixed income, CDs or a bond fund for hopefully a better return.

Wellington in Taxable is likely not tax efficient. If capital gains are too high to sell Wellington in Taxable, consider at least turning off reinvestment of dividend and capital gains and buying VTSAX US Total Stock Market instead.

MikeG62
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Location: New Jersey

Re: CD or invest?

Post by MikeG62 » Sun Oct 13, 2019 9:20 am

Boilermaker10 wrote:
Sat Oct 12, 2019 9:28 am

Have 250k in CDs maturing, wondering if they should put back into CDs @ 2.6% for 3 years, or to put in wellington or Wellesley.
OP,

You can get 3.25% at PSECU for 3-years. That would be $1,625 more per year(almost $5,000 over the CD term) in interest than the rate you quoted.

See this thread for more information.

viewtopic.php?t=292085

I opened two CD's two weeks ago and am in the process of opening an IRA CD there as well.
Real Knowledge Comes Only From Experience

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