Steve Reynolds: ‘Given the current rate for 5 year CDs at my local bank (3.15%) and the current stock market climate, what should a 59-year-old do with qualified cash that will be needed in 5 years? Fixed 5 year annuities are at 5.15% with a 5 year surrender period (no loads). NOW should I buy one?’
☞ The most obvious way to beat your bank is a 5-year treasury note, currently yielding 4.34%, and subject only to federal (not state) taxes. I’d prefer this to the annuity (which after state tax might amount to about the same yield) because it gives you the flexibility to cash out early (with a small profit, no less, as you roll down the yield curve) without a surrender charge.
Or you could twist your broker’s arm to buy you TIPS, which would yield a bit more than 3% on top of inflation. You’d have to pay tax on the inflation adjustment each year, even though you didn’t get it, but for such a relatively short period of time, I can think of worse things.
Are you sure you will need all this money in five years? Are will you just begin to need it then, and draw on it for 20 or 30 years thereafter? If the latter, consider a somewhat more aggressive strategy (and buy some TIPS, but for your tax-sheltered retirement plan). Have a good weekend!
Quote of the Day
I'm proud to be paying taxes in the United States. The only thing is, I could be just as proud for half the money.~Arthur Godfrey (when the top federal bracket was 90%)
Request email delivery
- Mar 26:
iPhone Tips And The KGB
- Mar 25:
Of Deficits And That Mechanical Swan
- Mar 22:
Pins And Groats — Be It Ever Thus
- Mar 21:
Demand Your Carbon Dividend
- Mar 20:
Success! Why Do New York’s Mayor And City Council Resist It?
- Mar 19:
The Other Kind Of Bankruptcy
- Mar 18:
- Mar 15:
Pete Buttigieg And John Delaney
- Mar 14:
The Fifth Risk
- Mar 13:
Reader Feedback: How About A Stock Update?
- Mar 26: