^^Yup. That’s what I have seen.
CD rates have really dropped in the recent months. My ladder is sad LOL.
It appears some on this thread are using this as an opportunity to critique or judge other’s financial plan. Crazy as they can’t possibly know the relevant information, both actual financial and risk tolerance. They also have no idea of posters experiences (positive and negative) with debt, investing, etc.
I was hoping to simply read what others are doing and learn from the collective experience. Not the case on this thread.
Andrews FCU has an 8 month CD special at 2.86% apr and 84 months at 3.45%. Anyone can become a member after jumping through some minor hoops. They also have a real chip+pin credit card.
Thank you, @Tanbiko. That is the kind of post that is truly helpful - of not for me, for someone else!
For most married couples it’s hard to see how a 3% taxable CD is going to deliver a better return than paying off a 2.6% mortgage unless you have minimal earnings (and therefore a very low federal tax rate), now that the $12K standard deduction and $10K state tax limitation make it less attractive to deduct the interest on your mortgage.
For folks who want to park their funds and earn a bit of interest, PenFed has a 2% savings acct with a $250k maximum. It’s less than 3% but there is no term you have to keep the funds in and no withdrawal penalty. It’s just another option for those interested.
So…when our mortgage was all paid for…are some of you suggesting we should have refinanced? I’m sorry but that makes no sense to me. We didn’t take money out of other accounts to pay our mortgage off…the term simply ended…and we were done.
Seems like this whole discussion about finding (or getting lucky to find) interest rate arbitrage opportunities with mortgages and CDs is really a minor issue compared to how much one needs at the high level view to be able to retire. Using $X cash to pay off $X of mortgage debt (or choosing not to) does not immediately change your net worth.
I’m still pondering Post #1. The recommendation is 25 times annual expenses. Wouldn’t you be able to reduce the annual expense requirements by guaranteed income such as Social Security and pensions? And then you have ‘remaining expenses’ that need to be covered by savings. So 25 times the remaining expenses?
I am in a quandary about purchasing long term care insurance. My Dad had Alzheimer’s with significant Memory Care facility costs but Mom and all other known relatives died relatively quick with just medical costs. I guess I have 50% odds I’ll need that long term care insurance which isn’t a good bet.
The 25 times expenses come from the FIRE people who want to be able to retire young, decades away from Social Security and Medicare (which many question will be able to pay the promised benefits by the time they reach the age to get them), and unlikely to have an employer pension that is well funded. Current older people may be more likely to rely on Social Security and Medicare existence, and are more likely to have pensions (but some may be dangerously underfunded and may be unable to meet their promises).
As noted earlier, assumptions in investment gains after taxes and inflation, and how much you are willing to consume principal, can be different for you, resulting in a different multiplier of expenses for you.
Expenses also need to be estimated carefully. Consider the cost of medical care after retiring and no longer getting heavily subsidized coverage from your employer. Even if you get Medicare, there are some premiums and optional supplemental plan costs to consider. Consider also if your retirement activities will be cheap or expensive.
Medical costs can’t get any higher than they are now.? No employer insurance, huge premiums, high deductibles, prescription coverage is a joke. I am counting the days until I can get on Medicare, and I plan to get the best supplemental insurance.
Have been reading everything I can about long term care insurance but I’m getting into it late (because I was too distracted with other things) and I know my premium will be high.
I actually expect to spend a lot on travel but probably only for about 10 years. But I’ve got all that in my plan. I’m just trying to make sure I cover unforeseen big expenses. I’m remodeling and fixing everything in my house right now to make it easier to maintain going forward but I guess I should put in an annual amount for the inevitable big ticket maintenance.
I’m glad you asked about long term care insurance, because it’s been heavily weighing on my mind. I know nobody can guarantee your longevity, but with our family history, I have a strong chance of outliving H by 10-15 years. But, if cancer doesn’t get him, he is almost certain to have Alzheimer’s. Almost every grandparent died of it or dementia, his uncle had it and his mom is going though it now. And they have not gone quickly. As heartbreaking as it is watching his parents, it’s awful knowing “you’re next.” And will it bankrupt us and I will have another 10-15 years in poverty? Should we get long term coverage? From what I’ve read, I thought it wasn’t worth it? Should we be doing anything else?
There were some excellent threads on the topic of LTC insurance on CC.
We paid our mortgage off in July. Took us 24 years, but we had a $50k equity loan in top of that fir remodeling.
Now, it’s going to be a $2,500 deductible for our fire issue. Glad we don’t have a mortgage!
My S15 just started his first real job as an actuary. His 88 yr old grandparents have been asking him why their long-term care policy rates have been skyrocketing. the rate is rising from $3k to $10K per year over the next four years. My son has no answers, but its been eye opening to him about the insurance world.
I have found firecalc to be the absolute best retirement calculator out there.
It’s not very intuitive but once you figure it out it’s great. For starters, the “Years” for the plan in the start box is years you expect you have left. I always just use 100-my age. Then you have to adjust all the tabs at the top of the page. Especially important if you have not yet retired. I shoot for a success rate of 95% on my plan and am comfortable with that.
As for the mortgage. My 3% mortgage will be done in 7 years 8 months (but who’s counting). I will throw the biggest damn party in the county when that happens and will not be getting another to invest the funds. My mortgage has been a huge thorn in my side for a long, long time and it will be such a huge relief to have it gone.
Some of you might think this is awful…a family friend has a husband who was diagnosed with early dementia. He was still lucid enough to make decisions at that point. They decided to immediately divorce…she is a finance person as was he. That way he could have minimal assets and Medicaid assistance. They structured their wills so that he will have more in the event that she does first.
I know that seems extreme.
@thumper1. It’s more common then you think. It happens also with the Elderly when going into a nursing facility. Most don’t have much money but at least want to pay for their funeral. So family members can slowly drain their accounts so when going into a nursing home they are on medicaid. This can reduce the stress of who is paying for the funeral later on. The money they have would be taken in the first few months anyway. Again not saying it’s right but it’s not the first time I have heard of this.
So, in working the FIRECalc mentioned above, it appears that I have an 82% chance of coming out above zero at the end of life. I am very risk tolerant (obviously from what I do for a living) but want to start moving towards a more conservative savings approach. The calculations I put in for annual expenses do not do include worst case Memory Care Facility for possibly last 4 years of life. There seems to be no way to add that into the analysis. Also, I have an additional home value lump sum available in case I have to sell my house to pay for Memory Care.
Does anyone understand those graphs? Is 82% good enough? Since the majority of the lines are above the zero mark? Geez, it runs the gamut of negative $250,000 to $3,500,000 at end of life