From way back, Kenoops said: why maintain rental property when you can buy a diversified portfolio of REITs, and further diversify with various utilities or other investments.Well, for me, it will be a desire to own more tangible assets, outright. Right now, the equity in my house and in my IRA is about equal. In fact, with the drop in the market, my equity is probably greater. I'm ok with that.It will be a while before I'll seriously consider a rental unit. And we may not do it if we move. One of the reasons why I do consider it now is because we live in a college town and even with decreased enrollment, I think I'd be able to rent it. And plus, we'd buy the house behind us, for the control aspect!As for retirement income, that's still 30 years away. I've had some Mutuals for 8 years now, and everything's been reinvested from them. They're doing nicely. I've always figured when the time came for income, I'd simply take cash instead of dividends.And about 3-4 years prior to retirement, I'd start turning individual stocks into CDs and staggering their maturity rate. It just doesn't seem like it would be that hard, I mean assuming you've got something to work with.Am I oversimplifying?André
You'd have to approximate what your principal will be at retirement and see if it will produce enough income if invested in CDs.........for example, if CD rates are around 6% you would need a million dollars to produce $60,000 worth of income.......
"From way back, Kenoops said: why maintain rental property when you can buy a diversified portfolio of REITs, and further diversify with various utilities or other investments.Well, for me, it will be a desire to own more tangible assets, outright"************************************************************************You should, of course, do what feels right to you. As far as "tangible assets" are concerned, I no longer literally own any rental property or rent any. Through my REITs, however, I "own" and "rent" hundreds of properties all over the United States in more than half a dozen different types of real estate, ranging from apartment buildings, offices, shopping centers, malls, and self storage facilities to manufactured home builders and health care facilties. This makes me feel a lot more secure than I felt a few years ago with one small rental house in a single area where residential real estate values were declining. And the lower volatility of REITs has to be seen to be believed--even in the midst of the current crisis. (Hence, why bother with bonds?) As far as "cash" returns are concerned, I would favor money markets over CDs. They are much safer than banks, in reality, although few people seem to be aware of it. The presumed safety of banks is an illusion. If more than a handful fold you have a real problem, despite the FDIC, which has very little money, actually.
for example, if CD rates are around 6% you would need a million dollars to produce $60,000 worth of income...Sure. But then, I'd only be turning more risky individual stocks into CDs. I'd still have my mutuals (changed over from reinvest to dividend), as well as other things like perhaps a rental or social security, etc.This makes me feel a lot more secure than I felt a few years ago with one small rental house in a single area where residential real estate values were declining.Thanks for that personal comment. I'm in no hurry to become a landlord, (mostly I'm in no hurry for the headaches of maintenance and renting it out). It's certainly true, values can drop. But markets can fall, too.Good comment also about money markets, etc. When I was typing CDs, I was thinking of a wider variety of options. So much of it depends on what's going on at the time. But it still doesn't seem that hard. I'll certainly keep REITs in mind... perhaps even the next time I need to diversify my IRA (my broker has several in their model portfolio).André
Because of the politics involved, the Federal government will probably cover all insured bank deposits as they did in the last banking crisis. And then there is the "too big to fold" situation in which Citigroup (as now called) was saved from bankrupcy about dudring the last banking crisis. And then there was the hedge fund that was bailed out just a few years ago.I've been involved in a number of savings & loan companies and banks that have been taken over by the Feds in the last decade or so. I've always been able to get my money any time I want although the new owner of the bank has the right to call any CDs the failed insitution offered (and you have the right to take your money). This actually happened once and when I went to take my money from a 5-yr CD, the new insitution offered me 7% if I kept a 7-yr CD. This sounded good to me and was a good deal as it turned out.But if a bank is actually closed out, you will get your deposits back (if under $100,000), but I'm told it can take as much as 18 months.As for money market funds, there was a crisis in them a few years ago, and the brokerage houses and mutual funds kept them solvent by pumping in money to support the $1/unit price. A number of fiscal conservatives have objected to all these bailouts (under the heading of you should accept the risk), but fortunately more liberal factions have ruled the day. They don't want us keeping our money under the mattress or in a tine can buried in the back yard. During the last banking crisis, there was a move by the fiscal conservatives to remorve the $100,000 insurance, but fortunately it didn't work our.Fortunately the forces for a monetary Wild West have not held the day. Some people apparently learned a lesson during the Great Depression.brucedoe
"As for money market funds, there was a crisis in them a few years ago, and the brokerage houses and mutual funds kept them solvent by pumping in money to support the $1/unit price."--brucedoe************************************************************************How bad was this crisis? Did the money market fund lose a penny on each dollar or was it something really serious? Did people lose control of their money for several months?
I researched this online a few months ago. Online records don't go back too far, but then again money market funds haven't been around long either. Some of the MMMFs were down to 97c on the dollar in the crisis referred to, which I would call serious. More recent MMMF "failures" have been on the order of 99.5c on the dollar. In all cases the parent brokerage or mutual fund company bailed out the mutual funds. The usual scheme is the parent company buys the distressed loans held by the MMMF at a premium price.Only one or two MMMFs failed to get bailed out, and they were both only for institutions. They liquidated close to 99c on the dollar.In all of these cases trading on the fund was halted, so people had to wait. I think it was on the order of a week or two.More recently, after 9/11 trading on most MMMFs was halted because the federal reserve banks were closed.Cash under the mattress and gold bricks in the backyard is still the only way to be 100% sure you can get at your money (at least, until the burglars show up).
No, the companies kept it stable, but it was a very controversial move as financial conservatives thought people should lose their money. Of course if they did, money market funds would have been dead on arrival and the companies were not dummies.Incidentally, insurance companies have gotten into trouble too, and the process has been that other insurance companies prop them up because they know that if insurance policies are ever defaulted (especially by a large company) insurance will be dead also.brucedoe
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