@busdriver11 We’ve had Vanguard MM since I worked there in the mid-80s, and the interest rate was always competitive. But when inflation and interest rates tanked, it was .01% for a good long time. We have moved funds back to Vanguard MM/brokerage clearing account because the rates are now much better – 30-day SEC yield of 5.06% as of 7/3.
USAA Performance Savings is currently paying .10%.
Vanguard’s default sweep account (VMFXX) is currently at 5.17% compound yield. It’s primarily a function of the federal funds rate. The federal funds rate is currently 5.1%, and Vanguard’s expense ratio is low, so I expect a little above 5.1%. Other money markets with low expense ratios also have a similar return. With the 5.1% federal funds rate, many other fixed income investments are also >= 5% including t-bills (state tax exempt) and CDs. A few HYSA are in this range as well.
This is very different from the start of 2022 when the federal funds rate was <0.1%. With a ~0% federal funds rate, nearly any short-term, fixed income asset paid out ~0% APY.
It is nice that ready cash savings in the bank is making a bit of interest again. (For years I had joked that interest had been declining so much that , “soon they might start charging us to keep it there”.)
At our credit union, they have been offering special rates for “new money” from savings or other banks put into CDs (first around 3% last year then 4% then 5%; 7 month or 17 month) . After that they auto-renew at a lower rate. Last month I decided to close out a CD to re-allocated into different amounts (to better earmark a specific chunk). Was delighted both new CDs qualified for the “new money” 5.16% rate. Perhaps they realize money will leave otherwise.
For those looking into estate planning and the use/treatment of assets for long term care and such, the IRS has issued a new rule regarding irrevocable trusts.
Well, Bank of America has a flex CD product (no withdrawal penalty after 7 days or so) yielding 5% APY. Not bad if you need guaranteed income for 12 months min.
A friend just told me they spent $8500 on a dog’s surgery (young dog), and the dog’s brother is under ‘conservative treatment’ to avoid this same surgery.
Larger expenses ARE going to come up for many people. That is why one has an emergency fund (or plans where they can take money out of investments for unplanned expenses).
Many people don’t have some of the choices others of us have. I held to the goal to retire right at 65; DH ducked out just a tad early from goal to retire 4 months after he turned 65 - but we had the funds to do so.
Often people with pets (more so with dogs) have to plan in expenses on dog care while they take a vacation elsewhere. That adds to the travel costs.
Wishing/wanting. People have to make choices on ‘having enough’ with retirement to live the life they want. One retires early. Wishing to move to higher COL area. Don’t want to go back to work.
Some people actually find work they love doing PT at the place they want to live, so they can enjoy a QOL retirement.
If I understand that correctly, the heirs would now not get the step up in basis only if the property was in an irrevocable trust. And that generally the purpose of an irrevocable trust is so you don’t have to spend down your assets to get Medicaid to pay for your nursing home? Meh, that doesn’t bother me, if that’s the case, it always seemed unethical to me that people could hide/gift their assets so then the taxpayers would have to pay for their care. I don’t know why people shouldn’t have to spend their own assets first. Seems like a legal scam.
I was surprised that assets in an irrevocable trust had ever received a step up in basis because I thought the point of the trust was to remove the assets from the decedent’s estate. If they’re not in the estate why would the beneficiaries receive a step up? However, if they’re in an irrevocable trust, the owner has relinquished ownership and control so those assets should not be counted towards Medicare or Medicaid care.
The new rule seems to be that you can put property in an IRT but if you want the assets to receive a step up it has to be included in the decedent’s estate. Doesn’t make sense because once it’s in the Trust it’s not in the estate. That’s the point of the IRT. Maybe the IRS is just issuing guidance?
“Prior to the issuance of this ruling, it was unclear whether assets passing to beneficiaries through an irrevocable trust would receive a step-up in basis, thereby eliminating any capital gains taxes that would otherwise be owed.”
I continue to work and expect to continue to do so for quite a while. But, I’m wondering how getting older should affect my time horizon. In particular, a specialized VC firm asked me to a) be an advisor to them; and b) make a small investment in the fund. This fund will probably be illiquid for a few years and my fee for the advice would come from an interest in the the fund management company (the general partner of the VC fund).
This would be pretty small as a percentage of my net worth. I like to economic thesis and can add value to the fund. But, I wonder whether I should be rethinking illiquid investments. I have other illiquid investments but I don’t expect to need the money from those investments for quite some time (or possibly ever) because as the first money I have saved that we will used will be from RMDs from my 401k starting at age 73.
Is that a typical request, if you are going to be a paid advisor, that you need to invest in the fund? I can understand a token investment if there’s a legal reason, but otherwise is that the normal procedure, and would this be the only request? Otherwise, that seems like a way for them to get money, ask people to be paid advisors (though not paid in cash) and say they must invest their personal funds to do so.
I’d much rather have zero interest for bank cash savings if it meant near-zero inflation.
It’s a way of creating upside to incentivize particularly important advisors because at the management level these investments are highly leveraged to success, often through ratchet shares that benefit more than the regular fund investors.
For example, I’m sure you’ve heard of “2 and 20” which means the management company gets 2% of assets (to pay staff and run the business) plus 20% of any increase in value each year. There is only a limited amount of equity in the management company (far less than the funds used to invest) so their 20% of the upside creates disproportionate returns for owners of that equity, if the deals are successful. And the tax treatment (as long term capital gains) is very beneficial compared to a fee for service model.
Yes, however, It just occurs to me that deals like these could be ploys to raise funds, and how many years will it take to see the benefits?
Ugh, I have been completely disgusted with my former company. Their board of directors now consists of three people from an activist investment hedge fund (out of 15), with more on their way. The company is struggling a bit in this economy, and is trying to reduce costs by 5-6 billion dollars, consolidating, stopping expansion and laying people off. But instead of thinking about the long term, using profits to pay off debt or save for a rainy day, they are doing billions of dollars worth of stock buybacks every year, and raising the dividend. Of course, now top management compensation is tied to stock price.
All that matters is the short term investment, forget about the long term viability of a legacy company, and commitments to customers and employees. What a world we live in, it makes me sad.
How long has it been since anyone has answered the OP’s question?
After 6000 responses, I think the original question has been answered many times.
No need to invest @busdriver11. I would receive compensation whether I made an LP investment, though I think the offer they made me was aimed at inducing me to make an investment. The compensation would be in shares of the General Partner which does get the 2 and 20 compensation package (some might be in cash from the sale of portfolio companies I help if I prefer). As @Twoin18 pointed out, shares in the GP are pretty attractive if you believe the underlying premise of the fund makes sense. I would only invest time or money if I liked the investment thesis and think the team has the skills and contacts to execute.
I don’t think many people like to share their personal numbers. But it sure has been a good discussion showing that there are MANY factors in the decisions (whether retirement includes employer pension/medical, cost of living, long term care planning, travel dreams, risk tolerance, etc etc).
And it has proven that most in this group are indeed fortunate.
“About 40% of older Americans rely exclusively on Social Security for retirement income, according to recent research from the National Institute on Retirement Security.”
The linked report at https://www.nirsonline.org/wp-content/uploads/2020/01/Examining-the-Nest-Egg-Final-2.pdf has more information, although the data is from 2013.
Table 1 of retirement income sources of persons age 60 and older working fewer than 30 hours per week indicates that the median income of all such persons was $21,144. For the 40.2% with Social Security only, the median income was $17,652, while those who had defined benefit (15.4%) or defined contribution (15.1%) (but not both) in addition to Social Security had median incomes of $30,120 and $28,476 respectively. The 14.9% who had none of these sources of income had median income of $8,904.
However, some people with lots of assets may be carefully managing them to have low income (avoiding capital gains, dividends, and interest outside of retirement accounts) in order to minimize yearly income taxes or pay lower prices for ACA or Medicare. But these are likely to be the minority of people described above.
Excellent points. Particularly with high medical costs I could see folks trying to game things for low income pre-65 to qualify for low income marketplace medical plans.
It does get me thinking… wonder if situation is better or worse than the 2013 data. I’d like to think a decade improved things, but certainly there are fewer and fewer pension benefits as time goes on.
People with their own businesses have more, ahem, flexibility with determining what their taxable income is. Not saying all small business owners do this with an eye toward gaming the cost of their marketplace health insurance, but I am aware that does happen. Health insurance costs are based solely on income, not wealth.