Thoughts on 'the market' and retirement fund, election, etc.?

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SlugSlinger

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please share with us where to find a high yield savings account with higher interest rates than consumer loans! Please do this! I want one! I want one!

I imagine you do, and there are reasons why you don't.

The thing is, timing is everything with interest rates. To take advantage of them you must go against common sense or intuition. Kind of like the stock market. Most people buy high and sell low due to emotions. And that's another reason not to take advise from most people. Also, credit score enables you to get the best rates possible and be able to negotiate rates.
upload_2020-8-5_7-50-20.png

When I bought my truck, I planned to pay cash, but the general manager told me if I took out a loan through the dealership, he would knock another $1,500 off the negotiated price. My first question was, is there a penalty for early payoff. He said nope and after reviewing the documents, there was no penalty. So I took out a partial note on Saturday. On Monday, I contacted both of my credit unions. One couldn't match the rate of 1.99% I got at the dealer, but the other cu matched that rate and paid me $200 to transfer the loan. So, Monday I paid off the dealership loan and moved it to the cu and essentially lowered my rate with the cash I received.

But, to your question. Are you familiar with high yield savings accounts? They pay higher rates than CDs in most cases and are FDIC insured to $250K. They are essentially risk free to that amount. Before Covid, the rate was 2.62% and I was paying 1.99% on my debt, including my mortgage. I was making money by not paying off my loans. When taxes were accounted for, it was not much, but it was net positive.

This is the current rate at one institution. Last week it was 1.11%, and it continues to drop. Again, it's all about timing and your credit score. If you borrow during bad times, you get a better rate if your score can support it. And you hold the cash. And when the economy turns around, you can be in the situation I was in before Covid where my savings is earning more than my debt was costing me.
This is today's rate at Vio Bank. They are a subsidiary of Mid First in OKC.
https://www.viobank.com/online-savings-account
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At this point in my mortgage and truck loan, I will pay $114 in interest on the declining balance of the loans until the loans are paid off, which is just a few months down the road. I will earn ~$106 in interest on the savings balance that is equivalent to the loan amounts today. There is no reason to pay these off early now.

And I haven't even mentioned my stock investments. This is where the compounding goes into high gear!
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tRidiot

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I agree Dan, I don't like the idea of pulling out of my retirement. I was just exploring the option with the ability to repay and the reduced penalties, but the more I look into it, I think the less I like the idea. I don't think I would be able to put ALL of it back into the fund in the required timeframe which WILL lead to taxation on the rest and a general loss overall in my retirement. I just don't think it's worth the savings of the 5.5% on my business loan.

I'm just bummed about the whole financial uncertainty right about now and showing up at work every day isn't fixing things.

Plus, I'm worried we're going to see major repercussions down the road, mostly from the financial fallout of the bailouts and forcibly compressed economy, combing with the uncertainty of the upcoming election, and the potential for COVID to hit hard this winter.
 

SlugSlinger

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I think we are all in the same boat when it comes to the uncertainty. It's good to talk about it and you may hear something that triggers you to look into something you haven't thought of. Good things seldom happen over night. Everyone just needs to create a reasonable and educated plan and stick to it until they can improve on that plan. I think a secret is to remove emotions as a variable and rely more on the math.


I agree Dan, I don't like the idea of pulling out of my retirement. I was just exploring the option with the ability to repay and the reduced penalties, but the more I look into it, I think the less I like the idea. I don't think I would be able to put ALL of it back into the fund in the required timeframe which WILL lead to taxation on the rest and a general loss overall in my retirement. I just don't think it's worth the savings of the 5.5% on my business loan.

I'm just bummed about the whole financial uncertainty right about now and showing up at work every day isn't fixing things.

Plus, I'm worried we're going to see major repercussions down the road, mostly from the financial fallout of the bailouts and forcibly compressed economy, combing with the uncertainty of the upcoming election, and the potential for COVID to hit hard this winter.
 

tRidiot

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I think we are all in the same boat when it comes to the uncertainty. It's good to talk about it and you may hear something that triggers you to look into something you haven't thought of. Good things seldom happen over night. Everyone just needs to create a reasonable and educated plan and stick to it until they can improve on that plan. I think a secret is to remove emotions as a variable and rely more on the math.

I agree... and I am in a much better place than I was 5-7 years ago. Just... the last 5 months have been painful and looking at all the bills coming due in the next month or two when business hasn't 'recovered' makes me more apprehensive. But staying the course is always solid as long as things don't truly collapse, which is unlikely. Unlikely, but remotely possible.

Again, if there is a REAL collapse, my retirement fund won't be what I'm worrying about. However, I also won't be worrying about the bank's piece of paper claiming title over me.
 

ICanFixIt

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Those "high yield" savings accounts and compound interest comments are pretty funny. Have you heard about the rule of 72? It says if you divide your interest rate into 72, it will tell you how long it will take to double your money. For example, if you divide 1.04 into 72, you will learn that it will take a little over 69 years for you to double your money. If the past 69 years is any indicator, you will need today's dollar to grow to $10.69 to just break even.

I have been pretty comfortably retired for over 20 years and my advice is, get out of debt and stay out of debt!!!! Buy a Dave Ramsey book and do what he says.
 

tRidiot

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Those "high yield" savings accounts and compound interest comments are pretty funny. Have you heard about the rule of 72? It says if you divide your interest rate into 72, it will tell you how long it will take to double your money. For example, if you divide 1.04 into 72, you will learn that it will take a little over 69 years for you to double your money. If the past 69 years is any indicator, you will need today's dollar to grow to $10.69 to just break even.

I have been pretty comfortably retired for over 20 years and my advice is, get out of debt and stay out of debt!!!! Buy a Dave Ramsey book and do what he says.

We have been doing the Dave Ramsey programs with our son since he was single digits. We just started a program last night with a book and DVD about the 5 biggest mistakes college students make, even though he is just about to turn 15. We are working HARD on him to teach him how to avoid the mistakes we made when we were young. Also trying to teach him to start saving for his retirement as soon as possible, avoid taking out ANY student loans for college, avoid ANY credit card use, keeping a savings account, paying CASH for things like cars and such, etc. I am determined he will learn and do better than me - I never had anyone teach me any of this stuff when I was young. I am still paying for mistakes. I still have some bad habits, but we have made strides, to be sure.
 

SlugSlinger

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Yeah, the thing with these accounts is they are effectively losing money due to inflation. However, for funds that could be needed immediately, they are better than a checking or regular savings account and they are better than dealing with the risk of short term investments in the stock market from the liquidity aspect.

This is a good place to hold the emergency funds that Dave speaks about in his videos. But it is not a good place for long term investments. Long term is > than five years.


Those "high yield" savings accounts and compound interest comments are pretty funny. Have you heard about the rule of 72? It says if you divide your interest rate into 72, it will tell you how long it will take to double your money. For example, if you divide 1.04 into 72, you will learn that it will take a little over 69 years for you to double your money. If the past 69 years is any indicator, you will need today's dollar to grow to $10.69 to just break even.

I have been pretty comfortably retired for over 20 years and my advice is, get out of debt and stay out of debt!!!! Buy a Dave Ramsey book and do what he says.
 

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