Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[philfree]

So I'm 63 years old and I have a life insurance policy for $250,000.00 that's costing me $300.00 a month. Let's say I have over a $million with no mortgage or car payment. I going to live off dividends. I drained my insurance policy a couple time some years ago so there's only about $5,000.00 in it. I'm looking to cut my expenses so I'm thinking about cashing out my policy, paying some bills and lowering my expenses that $300.00 a month. With the value of my house and the money I have I think they'll be plenty to leave for the kids and If I were to die unexpectedly everything is covered for the wife so I'm thinking I don't need life insurance.

What does the Oracle that is Chiefs Planet think?

[Buehler445]

Originally Posted by philfree

So I'm 63 years old and I have a life insurance policy for $250,000.00 that's costing me $300.00 a month. Let's say I have over a $million with no mortgage or car payment. I going to live off dividends. I drained my insurance policy a couple time some years ago so there's only about $5,000.00 in it. I'm looking to cut my expenses so I'm thinking about cashing out my policy, paying some bills and lowering my expenses that $300.00 a month. With the value of my house and the money I have I think they'll be plenty to leave for the kids and If I were to die unexpectedly everything is covered for the wife so I'm thinking I don't need life insurance.

What does the Oracle that is Chiefs Planet think?

Most of the "will it be enough?" questions are way too dependent on you to answer.

If you're planning on living off dividends, that can be tricky depending on what you have. For instance if you have $1M in like VOO Which is an S&P index fund, that's only like 15K a year in dividends.

Something like JEPQ has a pretty big dividend which $1M would get you close to 90K (this year), but it has historically a negative dividend growth rate, so in future years you wouldn't be getting as much in dividends. Add in inflation, and you'd better be living well below that 90K a year and hanging onto the extra.

If you leave it in higher returning stocks, you can fund retirement through sales of your positions, which leaves much higher growth potential, but you're eating your capital. Most things I've read suggest a 4% withdrawl rate is pretty safe. At $1M that puts you at 40K a year.

Dave Ramsey says you're good to go at an 8% withdrawl rate, which is the historic return of the S&P (I think that's where he's getting that), meaning that your returns would replace what you take out, but in down years, I think that would substantially eat into capital, then when the market has positive returns you'd be dealing with a materially smaller capital position. I'd probably get jittery in a down year if I was taking 8% out.

I tried to do some modeling a year or so ago. I'm 41, so it's exacerbated, but trying to genuinely forecast what I'm going to need to have in 40 years is pretty tough. Like impossibly tough.

For instance, inflation over the long term is almost unfathomable. The fed after this recent fiasco is consistent that it wants to hit a 2% inflation number. Well, 40K compounded at 2% (presuming the fed hits their target perfectly) for 30 years (it's not unreasonable you'll live to 93) is $71,033. Now who knows how it will manifest itself, for instance TVs are way cheaper than they were 20 years ago, but protein is not. It's impossible to know how cost structures will look in the future, but throughout your retirement you won't be completely unaffected by inflation.

So to the "will it be enough?", I give you a hearty "**** if I know."

If the question is what would Buehler445 do?

Buehler445 would cash out the insurance, take that 300 and stick it in your brokerage to bolster it. All the better if you can take the 5K of cash value and put it in there too. You'd be dollar cost averaging that extra 300 into your plan and put yourself in a better position to live off the income and keep your capital intact if you're intending the residual value to act as life insurance proceeds.

The return on life insurance is pretty low. Last time I looked at any it was capitalizing at like 4% or something. While it is nice to think about your survivors getting a check, from a financial perspective, you're better off investing it yourself. Just make sure your beneficiaries are set right on your investment account and you'll end up in a better place, provided you can keep your capital intact.

Good luck. When I started pushing numbers out for retirement I got real uncomfortable real quick. I'm probably overly pessimistic, but my grandpa just passed and his rest home bill was almost 8K a month. Comparatively, in 08 when my other grandpa passed his rest home bill was like 2K a month so I was staring that down, and realizing that shit can get really out of control really quick while nobody is paying attention.

Hope all that rambling helps.

[philfree]

Originally Posted by Buehler445

Most of the "will it be enough?" questions are way too dependent on you to answer.

If you're planning on living off dividends, that can be tricky depending on what you have. For instance if you have $1M in like VOO Which is an S&P index fund, that's only like 15K a year in dividends.

Something like JEPQ has a pretty big dividend which $1M would get you close to 90K (this year), but it has historically a negative dividend growth rate, so in future years you wouldn't be getting as much in dividends. Add in inflation, and you'd better be living well below that 90K a year and hanging onto the extra.

If you leave it in higher returning stocks, you can fund retirement through sales of your positions, which leaves much higher growth potential, but you're eating your capital. Most things I've read suggest a 4% withdrawl rate is pretty safe. At $1M that puts you at 40K a year.

Dave Ramsey says you're good to go at an 8% withdrawl rate, which is the historic return of the S&P (I think that's where he's getting that), meaning that your returns would replace what you take out, but in down years, I think that would substantially eat into capital, then when the market has positive returns you'd be dealing with a materially smaller capital position. I'd probably get jittery in a down year if I was taking 8% out.

I tried to do some modeling a year or so ago. I'm 41, so it's exacerbated, but trying to genuinely forecast what I'm going to need to have in 40 years is pretty tough. Like impossibly tough.

For instance, inflation over the long term is almost unfathomable. The fed after this recent fiasco is consistent that it wants to hit a 2% inflation number. Well, 40K compounded at 2% (presuming the fed hits their target perfectly) for 30 years (it's not unreasonable you'll live to 93) is $71,033. Now who knows how it will manifest itself, for instance TVs are way cheaper than they were 20 years ago, but protein is not. It's impossible to know how cost structures will look in the future, but throughout your retirement you won't be completely unaffected by inflation.

So to the "will it be enough?", I give you a hearty "**** if I know."

If the question is what would Buehler445 do?

Buehler445 would cash out the insurance, take that 300 and stick it in your brokerage to bolster it. All the better if you can take the 5K of cash value and put it in there too. You'd be dollar cost averaging that extra 300 into your plan and put yourself in a better position to live off the income and keep your capital intact if you're intending the residual value to act as life insurance proceeds.

The return on life insurance is pretty low. Last time I looked at any it was capitalizing at like 4% or something. While it is nice to think about your survivors getting a check, from a financial perspective, you're better off investing it yourself. Just make sure your beneficiaries are set right on your investment account and you'll end up in a better place, provided you can keep your capital intact.

Good luck. When I started pushing numbers out for retirement I got real uncomfortable real quick. I'm probably overly pessimistic, but my grandpa just passed and his rest home bill was almost 8K a month. Comparatively, in 08 when my other grandpa passed his rest home bill was like 2K a month so I was staring that down, and realizing that shit can get really out of control really quick while nobody is paying attention.

Hope all that rambling helps.

That's quite the reply and I appreciate it. I have a wide range of investments that all pay pretty big dividends so this has been my plan for the last handful of years. I've been reinvesting up until recently so my money was growing at a decent rate. Some of it was tax exempt so that helps a little. I do have a financial advisor so he's been working with me on getting me plenty of money to live on. I just don't need to waste money and at this point Life Insurance for us seems a waste. I think I'll start saving that $300.00 a month.

[Rain Man]

Originally Posted by philfree

So I'm 63 years old and I have a life insurance policy for $250,000.00 that's costing me $300.00 a month. Let's say I have over a $million with no mortgage or car payment. I going to live off dividends. I drained my insurance policy a couple time some years ago so there's only about $5,000.00 in it. I'm looking to cut my expenses so I'm thinking about cashing out my policy, paying some bills and lowering my expenses that $300.00 a month. With the value of my house and the money I have I think they'll be plenty to leave for the kids and If I were to die unexpectedly everything is covered for the wife so I'm thinking I don't need life insurance.

What does the Oracle that is Chiefs Planet think?

I think the main purposes of life insurance are (from larger to smaller costs):

1. Providing income replacement to raise minor children.
2. Providing income replacement for a spouse or other family members to meet their living costs (e.g., mortgage) and maintain their lifestyle.
3. Some people may want to create a windfall for their adult kids or other relatives. (This could be a large or small cost.)
4. Cover temporary costs for a working-age spouse who might need to take time off work to handle death issues, either logistical issues or grieving.
5. Cover funeral costs.


If you're close to retiring and feeling good financially, I'm guessing that ...

Items 1 and 4 aren't an issue.

Item 2 may be an issue if you have a pension or Social Security that is vital for a spouse to be able to stay in the house and cover a mortgage or cover basic living expenses.

Your call on Item 3, though that's highly optional.

Regarding Item 5, I guess it's a guarantee that you can cover funeral costs if something really goes south and you get swindled out of all your money, or if you outlive your money. It's your call if that's more likely than the insurance company going bankrupt or something.

My wife and I have 25-year term policies that should be expiring relatively soon. We have no mortgage, no kids, and adequate savings, and we're both more or less retired now. We don't have pensions, so the only income replacement that insurance would cover is our Social Security. Something really bad would need to happen for us to not have enough for funeral expenses, so I don't think there's much of a case for us to continue with life insurance once this term policy expires. The savings will also help us make sure our savings lasts longer. It's a pretty notable cost. I think my wife and I pay about $3,000 a year for life insurance, which is pretty big chunk of after-tax income.

The one twist on this is long-term care. You can buy long-term care insurance, of course, but you only get a benefit if you go into long-term care, and that's not guaranteed to happen. However, it's guaranteed that we'll eventually die. If you've got enough money to front the costs of long-term care, a life insurance policy could pay back the surviving spouse for those costs if they occur. That's the concept that I've been pondering. If life insurance is cheaper than long-term care insurance (and I don't know if that's true), AND if you have enough money to pay for long-term care if it's needed, then I think this could be a good idea.

[BlackHelicopters]

Bitcoin for the win.

[lewdog]

Yeah, today was fun as hell. Not sure how much more vertical the market can keep recovering from these dips.

[Buehler445]

So anyone following the building war between retailers and credit card companies?

Apparently retailers are sick of paying CC fees. Which makes sense. No place is charging extra for credit card transactions vs cash. I Think there are laws where you can't charge different amounts for payment types. I might be wrong on that, but as of now there isn't anybody doing it.

Now I fully acknowledge that dealing in cash isn't just adding 3% (or whatever the CC fees are) to gross margin. There will be shrink obviously, and it takes physical labor to handle cash.

Walmart is going around all that by trying to get customers to set up an ACH out of their customer's bank account. After they get the ACH fees paid off, there really will be adding money to their gross margin.

It will be interesting to see if they can get any traction. I don't own any credit card stocks, but I've long since thought it's dumb not to. There are giant ass moats for competitors, shit is pretty automated, and I think default risks goes to the issuing bank, it's a ****ing brilliant business model. This would be the only trouble on the horizon.

Anecdotally, some local shops have started passing on CC fees to customers. I don't know if that's legal or not, but I get it.

What are your guys' thoughts on it?

EDIT: Link to article.

[KCUnited]

Originally Posted by Buehler445

So anyone following the building war between retailers and credit card companies?

Apparently retailers are sick of paying CC fees. Which makes sense. No place is charging extra for credit card transactions vs cash. I Think there are laws where you can't charge different amounts for payment types. I might be wrong on that, but as of now there isn't anybody doing it.

Now I fully acknowledge that dealing in cash isn't just adding 3% (or whatever the CC fees are) to gross margin. There will be shrink obviously, and it takes physical labor to handle cash.

Walmart is going around all that by trying to get customers to set up an ACH out of their customer's bank account. After they get the ACH fees paid off, there really will be adding money to their gross margin.

It will be interesting to see if they can get any traction. I don't own any credit card stocks, but I've long since thought it's dumb not to. There are giant ass moats for competitors, shit is pretty automated, and I think default risks goes to the issuing bank, it's a ****ing brilliant business model. This would be the only trouble on the horizon.

Anecdotally, some local shops have started passing on CC fees to customers. I don't know if that's legal or not, but I get it.

What are your guys' thoughts on it?

EDIT: Link to article.

It is interesting

One obvious consideration is cash back or points for consumers. Thats an incentive cc companies provide and also the really annoying thing about retailers passing on the cc fee to the consumer, nullifying the incentive

I get it though. Purely anecdotal but I've gotten to know one of the partners in a craft beer and wine bar. He was talking a bit about this and brought up an interesting trend he's observed. Not only are people using cards more over cash but they're also swiping more. No one really leaves their tab open and pays at the end of the night anymore. Instead they close it after each drink and as friends show up and the night goes longer they may have swiped half a dozen times. Similar with groups splitting tabs

[Buehler445]

Originally Posted by KCUnited

It is interesting

One obvious consideration is cash back or points for consumers. Thats an incentive cc companies provide and also the really annoying thing about retailers passing on the cc fee to the consumer, nullifying the incentive

I get it though. Purely anecdotal but I've gotten to know one of the partners in a craft beer and wine bar. He was talking a bit about this and brought up an interesting trend he's observed. Not only are people using cards more over cash but they're also swiping more. No one really leaves their tab open and pays at the end of the night anymore. Instead they close it after each drink and as friends show up and the night goes longer they may have swiped half a dozen times. Similar with groups splitting tabs

That's....weird.

I understand there is some risk in running a tab especially if you give them your card (no clue if that's still a thing. Been a minute since I've been in the bar scene).

But as a dude who's had to reconcile credit card statements to classify purchases, these folks are DEFINITELY not even looking at their statement if they're swiping it 6 times at a bar. Yikes.

It's been a long time since I've looked at credit card retailer fees, but if there is a transaction fee plus the percentage fee, that's probably eating up your buddy. That would suck.

[DaFace]

Originally Posted by Buehler445

That's....weird.

I understand there is some risk in running a tab especially if you give them your card (no clue if that's still a thing. Been a minute since I've been in the bar scene).

But as a dude who's had to reconcile credit card statements to classify purchases, these folks are DEFINITELY not even looking at their statement if they're swiping it 6 times at a bar. Yikes.

It's been a long time since I've looked at credit card retailer fees, but if there is a transaction fee plus the percentage fee, that's probably eating up your buddy. That would suck.

It seems a little weird for us, but in a lot of foreign countries (where tipping is less common and tap to pay is the norm), it's pretty standard. You just get your drink, tap the terminal, and go about your night. Bartenders don't have to deal with tabs at all that way, and if you decide to leave after a drink, you just walk out.

Of course, one key is you have to have the agreements with the credit card companies to only charge a % fee rather than a transaction charge to make that work. I'm not sure how common the different arrangements are here.

[DaFace]

As for the question of the legality passing on CC fees, there's a super weird nuance to it. You can't "add fees" for credit cards in all states (though you can in most these days), but you can offer a "cash discount" (which obviously amounts to the same thing). Regardless of how you do it, it's largely just a question of how many CC users you want to piss off in exchange for overcoming the fees.

[KCUnited]

Originally Posted by Buehler445

That's....weird.

I understand there is some risk in running a tab especially if you give them your card (no clue if that's still a thing. Been a minute since I've been in the bar scene).

But as a dude who's had to reconcile credit card statements to classify purchases, these folks are DEFINITELY not even looking at their statement if they're swiping it 6 times at a bar. Yikes.

It's been a long time since I've looked at credit card retailer fees, but if there is a transaction fee plus the percentage fee, that's probably eating up your buddy. That would suck.

I think its mostly a flexibility option and possibly a portion/cost control mechanism (or maybe thats just me haha). "I've already tabbed out, I should just go" kind of thing

I know I've been annoyed before waiting to get someone's attention just to tab out so I understand just closing out while you have them there, especially if you're uncertain about your plans

[Buehler445]

All that is fair.

I think about going to the ATM and getting and maintaining cash, I dunno. The convenience isn't without value.

I really don't know how this is going to play out.

[Buehler445]

One thing I know for sure, I trust the auto-pay and transaction security more with the credit cards than trusting Walmart. If they'd incentivize it I might take a look at it but all things being equal, I'm rolling with the company whose core competency is transactions as opposed to squeezing vendors..

[GloryDayz]

Originally Posted by DaFace

It seems a little weird for us, but in a lot of foreign countries (where tipping is less common and tap to pay is the norm), it's pretty standard. You just get your drink, tap the terminal, and go about your night. Bartenders don't have to deal with tabs at all that way, and if you decide to leave after a drink, you just walk out.

Of course, one key is you have to have the agreements with the credit card companies to only charge a % fee rather than a transaction charge to make that work. I'm not sure how common the different arrangements are here.

I spent the last two weeks in Egypt and that's how it worked. And there's nothing cooler than $1.62 for an Uber - it was amazing..