Ag CPA said:

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Sign of the times when collecting 5% risk-free is a let-down.

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Well yeah, inflation is above 7%.

I'm heavy cash right now for a variety of reasons and I'm 49. We've been increasing our conservative allocation over the last couple of years because we are likely retiring early (my wife already has) assuming we aren't fighting actual insurgents here in a few weeks.

Nothing wrong at all taking a guaranteed 5% return if it fits into your plan. My FA is fine with us sitting a little heavy right now as long as we aren't diverting from the plan.

this is a man who understands risk

Proposition Joe said:

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EliteZags said:

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Just curious what's the best way to go about consistent 5% guaranteed on 7 figures

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Right now? There's a number of high yield savings offering 4%+. With a few like Marcus Savings with referrals you can get bumped to 5%+.

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I got a 5.25% savings acct at UFB Direct online bank. FDIC insured.

el_guapo said:

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Proposition Joe said:

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EliteZags said:

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Just curious what's the best way to go about consistent 5% guaranteed on 7 figures

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Right now? There's a number of high yield savings offering 4%+. With a few like Marcus Savings with referrals you can get bumped to 5%+.

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I got a 5.25% savings acct at UFB Direct online bank. FDIC insured.

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For the rest you can do a 3 month CD ladder or 4 week treasuries that yield north of 5% apy. You could buy one each month (ladder) so you have something maturing regularly.

Andrew Dufresne said:

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It's hard to pass up that guarantee.

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By several good metrics the market is overvalued. And several metrics show a very good chance for a recession. If that happens, earnings decrease and likely, the stock market. Taking a 5% guarantee is not a bad idea regardless of your age. You can ride that decent return and when the market takes a hit, start working cash back in getting more bang for your buck. Given the current situation you might be being opportunistic rather than a puss.

ATM9000 said:

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dallasattnyag said:

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This is a man who can afford to take a 30% hit.

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Grasping what you can afford to lose is like 75% of understanding risk.

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Grasping what you can afford to miss out on is the other 65%.

That zero return in real dollars or possibly negative with Bidenflation

txaggieacct85 said:

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That zero return in real dollars or possibly negative with Bidenflation

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Maybe but we are well diversified and it's cash that I want liquid for projects. As soon as it's not earning 5.5% then maybe I'll move it elsewhere.

Like I said earlier, it's part of our overall plan so as long as we are meeting our goals I'm good with it right now.

Quote:

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By several good metrics the market is overvalued. And several metrics show a very good chance for a recession. If that happens, earnings decrease and likely, the stock market. Taking a 5% guarantee is not a bad idea regardless of your age. You can ride that decent return and when the market takes a hit, start working cash back in getting more bang for your buck. Given the current situation you might be being opportunistic rather than a puss.

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I'm with you.... parking some recent bonus checks in CD's to take the 5-1/2 CD and waiting for the time being for opportunities.

There was a poster on another thread that said something to the effect that "any 10 years of investing in the S&P EVER IN HISTORY" would have outperformed a 6% CD.

I'm 50 and there have been TWO ten-year spans where that wasn't true. ('72-'82 and '99-'09)

We've been on an amazing run, but it feels we are long overdue for a prolonged rough patch (The brief Covid drop nonwithstanding)

txaggieacct85 said:

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It's not risk free. You're missing out on much bigger gains. But at the end of the day, it's none of our business. And at this point you're barely keeping up with inflation

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After tax, you lose to inflation. Sorry.

N/M

I wouldn't say OP is being a puss but I do believe you could do incrementally better over the long haul with some asset allocation strategies. It's about what your goals are. Maybe you don't care about growth and your'e happy with taking income and keeping the principle stable. Nothing wrong with that. Do you have any heirs and do you care if they inherit anything or not?

You and Warren Buffett

I'm 44 and my fidelity advisor keeps saying I have a high risk asset mix and not diversified enough, but I've made ~20% return for about 7-8 years in a row, so I'd be disappointed had I put a bunch in at 5% knowing my returns.

AAPL is nearly 20% of my investments lol. Getting close to 10x return on my first buy in.

Except he has sat out of the market for the last year and half (i.e. SPY under $450) because of that sweet sweet guaranteed 5% was too good to resist

You should really talk to an advisor and figure out either a plan of action for when you might invest in the market, and how much. Or maybe they could convince you to invest part of it now. I agree with the concerns on the valuations now, but that's been the case for years. I'd probably put at least 5-10% in the market now (or trickle in over 6-12 mos). It will be years before you'd need that it sounds like, so any dips wouldn't matter that much along the way.

Sounds like you're in a great (and comfortable!) spot, but you could get a lot more return over the next 10-20 years with very minimal risk to your actual lifestyle.

Thanks. I'm comfortable with my action plan as-is. I don't feel the need to take on more risk to make more money that I won't spend.

The consequence of risk isn't equal in my situation. On one hand, take more risk and make more money. Great! But I won't spend it, what's the point? On the other hand, take more risk and lose my ass. Then I have to work as an old man to pay the bills, or we lower our expected standard of living in retirement. That sucks a lot more than the upside of making money that I wont' spend. I don't owe my kids a bigger inheritance at the risk of falling short of my wife's and my retirement needs/desires. I've put them through school debt free; they are good to go.

The key thing is to align your risk with your risk tolerance. The other poster who's older than me is still 100% in equities and apparently sleeps well at night. Good for him! As well as others who are comfortable with more risk and the potential for more return. I wish you well. But there are others of us who are more comfortable with less risk, and that doesn't make us wrong.

The only reason I'd suggest a possible change is how your assets and income look in a scenario where you and/or your wife live a LOT longer than you ever thought you would. Is there a scenario where you might actually consume the existing nest egg and you WOULD need more assets 20-30-40 years down the road?
From your comments, that sounds unlikely…but for me that would be the main driver to consider something with more growth potential for at least part of the portfolio.

That would insulate you somewhat from a scenario where inflation spikes, and interest rates get cranked up and the value of those bonds and the purchasing power of that cash gets hammered hard.

There are other risks than just a decline in the stock market. I'm guessing you got to the financial position you're in now thru either a lot of luck, or some damn hard work, or both. I'd talk to a professional to make sure you're covered from some of those other risks I described.

Thank you. I've got substantial real estate equity that's not in those numbers, nor is social security, and I could always tap the principal in the portfolio. If I'm still on the green side of grass 30 years from now I probably won't care about much beyond bedtime and my next meal, based on experience with seniors in our families. 40 years is a pipe dream. I'm very comfortable with our risk profile and options to maneuver depending on how things play out. One thing I've learned is it's important to have financial flexibility because your priorities change as you evolve thru the cycles of life.

While all of that may be true for you, I don't think the advice being sought here is of the "I've got enough money to live comfortably until I die and I'm not interested in making any more" variety.

It's an interesting conversation on risk vs. return. There are both sides of a spectrum here, as well as points in between. I'm simply offering a perspective from a low risk tolerance perspective as compared to others who are more comfortable with higher risk. The key point I'm trying to make is there isn't a wrong answer as long as you align your risk profile with your tolerance for risk. Of course you need to be prepared to own the consequences of your risk tolerance, but that comes hand in hand with the freedom to make your own decisions.

It is an interesting topic. And from what you've described, I see no real reason to change anything. For you to have any problems with your plan, it feels like we'd be looking at some real outlier scenarios.

For someone taking your approach with a little less solid of a base to start from though, I think they'd need to consider if they are just trading away market risk for inflation and superannuation (living too long) risk. So what someone might think is "low risk" is really just low in one area of risk, but has a lot more risk in other areas that's harder to see.

My grandparents were savers all their life. But that savings went into CDs. When my grandmother got into her upper 80s, those few $100K in CDs that had been drawing 2% or so for a decade+ weren't the big fat safety net that was expected back 20-30 years previously. Thats part of my perspective on this.