This works to potentially maintain a nest egg but I don’t see it working to BUILD a nest egg.
I was “trash talking” nothing. I was only disagreeing with your “stocks are normal” statement. Of course many retirees believe stock investing is the way to go. I understand that.
But it might surprise you how many dissenters there are!! It is your description of our investing approaches as, in effect, abnormal to which I was reacting. Stocks are not the only way to go.
Inflation and taxes are not the same for everyone. I have experienced almost no inflation because I don’t have the type of expenses which has been most sensitive to inflation, like college tuition, medical expenses or housing/rental expenses. Income from CD portfolio has not only paid for all my living expenses, but has also considerably added to my net worth. I should also add that I don’t deprive myself of anything. I eat out and travel whenever I want and even indulge myself with extravaganzas, such as attending the Super Bowl in Atlanta. I live in California.
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What do 401k’s and Ira’s invest in? WHat about profit sharing plans? Company Stock Purchase plans? By and large the stock market. I will stand by the statement that investing in the stock market is the “norm” for the average person saving for retirement. There will always be exceptions. Again, I don’t mind you disagreeing with me provided you are willing to list alternatives you feel would work and I’ve listed several. Insurance annuities would seem to offer you both the return you are looking for and the guarantee you seek. Even there many are indexed against the stock market.
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I suppose that depends on what all you consider inflation. Its the “cost of living”. Some of it is inevitable. The 16 ounce can’s that became 15.5, 15 and now 14.5 and the 1 lb packs of hamburger that are now .75lb with the price remaining basically the same are still factor’s you can’t avoid. Heck the 6 little packs of raisins used to be 1 ounce each and are now .75 ounce. It’s the same across the board. Your dollar buys less now than it did last year or the year before. Medical bills are an inevitability I’d surely do without.
I agree. The most frequent retirement income advice is actually to have a mix of fixed income, bonds, and low-cost mutual funds or ETFs. That’s for capital preservation mind you, not growth.
I’m comfortable with this setup myself but I don’t mind hearing about alternatives to CDs when rates are dropping quickly (like they are likely to do on Wed again). If the situation here gets close to that of some countries in Europe, I don’t think CDs will be able to cut it for many people without a disproportionately large nest egg.
The problem is Japan did not have much deflation. If you look at their cumulative inflation over the last 20-30 years, it’s been very slightly positive, not negative. Last year their inflation was over 1%, yet their deposit rates have been firmly negative for over 3 years now (in vain for the most part). So it’s the opposite picture where rates are negative and inflation positive. That one is definitely not good for savers and traditional fixed income short term vehicles (like CDs).
My comment was based on my own experience of not really caring what CD rates are gonna be because my retirement won’t rely on them for a large part. I’m looking at a 1.5% withdrawal rate on my portfolio to support our lifestyle so. As long as my portfolio doesn’t lose more than 1-2% per year vs inflation, I could more or less live forever on that. But for those who had to assume 3-5% over inflation returns to make their retirement income last, they’re not going to be able to do so on 0-risk investment (like savings and CDs). That’s all I meant.
Just as an update the 10 stocks I previously mentioned and purchased back on Aug 16th have been doing fantastic. They produce the expected dividends but have overall also increased around 12% in value. An unexpected bonus. Certain ones such as AbbVie make me wish I had put more in them as it’s up around 39% since 08/16. Anyway here’s the table(initial setup was 10 stocks receiving $6000 each. Peak changed names from HCP):
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Congrats. Nice call. 8/10 is pretty impressive. Are you continnuing to hold them, or taking some profits?
I initially purchased from as “dividend income” and am thrilled they have gone up in value as they have because honestly I was prepared for all of them to drop as long as they maintained their dividend which they have. The dividends have been being re-invested into a 2020 Aggressive retirement portfolio M1 Finance generated which is up 10% since April 1st. Currently just letting it ride although I may purchase some of the weakest 2 at a discount on a down day. Their dividends are still attractive and better than the bank rates.
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Given current happenings in the stock market, not sure I like stocks as an alternative to CDs . . . for retirees, I mean. Risk is feeling a little high at this point.
Of course for younger folks, with MANY years ahead of them, stocks remain a good bet . . . . . I hope.
OK I’ll play devils advocate…first for folks who purchased stocks for dividends as long as the dividend remains the same it really doesn’t affect them…yet. It all depends on when they choose to sell the stocks. If they have no intention of doing so then it’s not really an issue that the price has dropped.
For those with excess cash that becomes available now might be the time to dip INTO the market and purchase $xxx per week, month…whatever…because the market now has a decent way to go towards “recovery”. Of course on the other side are the people predicting a 40% drop in the market at some point in the future…of course they’ve been predicting this for the last 5 years if not more too. I’m personally increasing the amount I’m investing per month and I’m already retired.
Daredevil, catch a falling knife move. I like it!! 
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Interesting strategy in this market environment.
Making any money? Or are you so young you can simply go back to work if you lose too much? We are down roughly an additional 1700 Dow points as I compose this. How low will it go? Please tell us so we all can buy in at the bottom . . . if there is a bottom.
There will be a bottom, there always is. I have been alive for a long time and have pretty much seen everything. This crisis will pass.
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You’re right. No doubt about it. Question is: when.
Following the 2008 crash we were still not percolating eight years later.
During a crisis, you don’t want “cash alternatives”. You want FDIC insured cash or treasuries. Bad Stuff can happen and you may end up with your money market fund for example frozen for months and even then not get all your money back.
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This crisis is much different than 2008-09. Once the virus is under control (probably before summer), I think the market will recover. Interest rates may be a different story since the Fed may not want to reverse these cuts, although I expect 10-yr treasury yields to go back to higher levels.
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I’ll assume you are asking honestly and not being sarcastic for no apparent reason. You are assuming the money I have invested is money I can’t afford to lose? I’ve doubled my weekly contribution to buying into the “2020 aggressive” plan from $250 to $500. ($24,000 a year). I may put more toward the dividend stocks I’m watching if they’ve become attractive. I hardly think that’s gonna make me or break me. Additionally almost any financial planner will tell you that dollar cost averaging by making regular purchases is the safest method which is what that money is doing. As for having to go back to work, I live very frugally…the money from social security + the 2 garden saving 4% cd’s I have is more than enough for me to do anything I need/want since both house and vehicles are paid for and I have 0 debt. My credit cards pay me anywhere from $250 to $1000 a year to use them via cashback including all the rotating 5% categories of various cards. Regularly investing in dividend aristocrats whether it’s ones that thrive in a market like this (Netflix and other streaming services/devices like Roku etc which recently took a 44% drop in value, grocery delivery, insurance) or others will still get you a consistent income whether the purchase price is going into the toilet or not. I keep telling you this but you don’t seem to grasp it. Unless ALL the dividend aristocrats decide to stop their dividends at the exact same time I am unaffected by the market fluctuations until such time as I choose to sell them. I also recently moved a decent amount from my IRA to my Roth IRA…while I’ll be taxed on that money which is pretty much back to levels it was several years ago when the market recovers all that growth will be tax free at that point vs tax deferred.
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Famewolf, I admire your courage. You have MUCH more than I have! And if you end up making a lot of money, which I hope you do, you surely will deserve every cent! You are a good fellow.