Remember when CDs were a thing?

No, not those CDs.

One of our members set up an IRA around ten years ago. IRAs can be any type of account, and this one just happened to be a CD. At the maturity of the CD, the company managing it automatically rolled the money into a new CD at a much, much lower rate for another ten years. The kicker is that there is a stipulation that if he were to pull the money out early, he would be charged the equivalent of the interest he would have received for the remainder of the term. Needless to say, that was pretty fishy, what with consumer protection laws and such. After some minor phone time with the company, things will be made right. The moral of the story: open your mail, and don't be afraid to stand up for yourself.

Meanwhile, SPY has been dipping below the 200 DMA, which tells us that it has been trending down. The thought is that in general when you go below the 200 DMA, you're going to be in for a longer term downturn. If that is the case, we should try to buy around when we see the bottom or perhaps just past it.

For next week, we'll talk about estate planning.

Profit!

Retiring so soon?

Almost everyone has concerns about retirement. How much money will I need? How much do I need to save? How much will inflation affect the price of denture cream? We can't answer those questions, but we may be able to help figure out how much you will get if you know how much you have currently, how much time you have left and how much you can contribute.

One of our members just accepted a new job (yay!). As a result, they are working on a new budget to figure out how much money they can put into retirement, short-term savings and spending accounts. They started plugging numbers into a spreadsheet and offered it up to anyone else trying to figure out how much they need to put away for retirement. The calculations are all listed on the side of the spreadsheet, along with a section for roth accounts. The roth accounts are special because they will not be taxed as income in retirement.

Make a copy of it for yourself and enjoy. Enter in your current funds as well as your predicted interest rates, yearly contributions and years till retirement and the spreadsheet will do the rest! Oh right, you can access the spreadsheet as a Google doc here.

You're gonna die!

Here's to you, Frank Cross--you're gonna die!

One of our members was interested in annuities, particularly joint with beneficiary annuities which would pay out a lump sum after you and your spouse kick it. This article and audio clip from NPR is a nice primer. There are a few types of annuities, but you can look at them as private pensions of a sort.

With a fixed annuity, you pay in a lump sum, and receive payments later for some agreed-upon interval (usually the rest of your crummy life). The variable annuity is a mutual fund-type of account, with an insurance aspect, where you invest and the yield of your investments is the basis for the amount of your payments. One of the big issues with a variable annuity is the high level of fees you pay out combined with the fact that you are also not getting the tax benefit of something like an IRA. A bad deal, indeed. 

 

For further reading, we're told you could check out Pound Foolish: Exposing the Dark Side of the Personal Finance Industry. Since this is an insurance product, there is an element of gambling to this. If you live longer than the annuity provider thinks you will, you win. You have to keep in mind that any insurance product is designed so that the insurance company gets more money coming in than they pay out. However, if you pay into it and die "early" they win. As with anything, you need take into account who you are (personal habits, health, etc.) and the responsibilities you do or don't have to others after you join the Choir Invisible. A common theme with annuities is that they are a fairly final decision, due to the penalties and fees if you try to back out early. 

It used to be that you took care of grandma, but with the Baby Boomer generation there was a shift toward leaving your children money. The other side of that shift is that possibly the younger generation might be less concerned with helping grandma and more so with how much their going to get. Ultimately, this is a practical link to your philosophical outlook and is some heavy stuff indeed. 

For next week, more investment analysis.

Profit!