Interest Rate Drop | Don't Miss Out on Higher Returns 

they won't . That s just promise.

I would hope that the fed considers all angles before making a decision

They won't be able to because nobody will be interested in buying the ever growing and increasingly risky govt debt at the lower rates.

yea im convinced theyre not cutting rates this year. tight labor market, higher than normal gdp growth, and higher than 3% inflation means theres no reason whatsoever to cut rates.

@@titolovely8237completely agree.

Definitely a reason to go with T-Bill and T-Bonds. We use TreasuryDirect.

@@JBoy340a Yes...the biggest advantage of using TreasuryDirect is the $100 minimum as compared to most brokerage houses needing $1000 increments.

Choosing not to invest is actually MORE risky than not investing, in the long run.

@@justthebrttrk says the person who was probably not in the market in 1980s.

Whoa...that is actually very risky.

@@jabow1878 if you had left your money alone, invested in the s&p500 in the 1980s, you'd be a multi millionaire today.

What happened then? ​@@jabow1878

And better than making .05%

And as long as your not paying a greedy advisor your better off

New issue 2-year notes are paying 5% with a coupon rate of 4.65

@@markritacco270 2 years is a little long for my horizon. So far I have been doing well for the last 8 months, I know that that can change at any time but it is my comfort zone. The state tax exemption alone is huge as I am in the 9% bracket in California. For now for my savings that is where I am focusing.

@@Dodgerblue7381-ey3ql I completely understand about the longevity, I was just giving an example for a different option. I myself utilize T-Bills (4 week), for a laddering effect to get available money each month. The fact that CA has the enormous TAX burden, utilizing what you are doing with Federal Fixed Income (your T-Bills) is a HUGE benefit with just having to not pay state or local taxes. Good luck with your future endevours.

@user-ip6zt8je9v What rules for borrowing are relaxed? I thought the rules have been much stricter since 2008. Mortgage application rates are low and application denial rates are high

If you do it by the end of the month (April), you will benefit with a slightly higher rate.

If you do it by the end of the month (April), you will benefit with a slightly higher rate.

How will the Treasury afford to make those payments when they're already being crushed by debt?

@@nicolasgirard2808 money printing Quantitative easing (QE) is a form of monetary policy in which a central bank, like the U.S. Federal Reserve, purchases securities from the open market to reduce interest rates and increase the money supply. Quantitative easing creates new bank reserves, providing banks with more liquidity and encouraging lending and investment. In the United States, the Federal Reserve implements QE policies.

@@markritacco270 so they'll cut rates?

@@nicolasgirard2808 While QE policy is effective at lowering interest rates and boosting the stock market, its broader impact on the economy isn’t apparent. Commonly, the effects of quantitative easing benefit borrowers over savers and investors over non-investors, and there are pros and cons to QE 1. Inflation does not spur intended economic growth but causes inflation can also create stagflation 2. Limited Lending creates a “credit crunch,” where cash is held at banks or corporations hoard cash due to an uncertain business climate 3. Devalued Currency value makes imports more expensive, increasing the cost of production and consumer price levels.

i've heard diamond nestegg and others say things like 1.3% is the highest its been in 16yrs if that's actually a good thing. that means for the past 16 years it hasn't. i-bonds have grossly underperformed say a boring mutual fund and no matter how much you want to hold in gift account, i-bonds will continue to underperform. Yes, those with 3% plus from decades ago got a nice boost for the past 1.5yr with higher inflation rate on i-bonds, but they weren't doing so well for all those intervening decades. That will remain true for the current 1.3% fixed rate new issue ibonds in the future. The govt and fed are doing their darndest to work against inflation, which means they are working against i-bonds. Why would you invest into that headwind for 1.3%? We should expect new issue May24 ibond fixed rate to be around the current 1.3% fixed new issue. Since the rates are based on TIPS, you are better off going with TIPS over i-bonds, especially given TIPS don't have the $10k annual limit. I'd rather just sit on my tbills or tnotes rather than spending so much time pontificating about i-bonds.

I wish i had your level of wealth building

@@ryebread447 I utilize no-buy months (other than fixed expenses) and that truly helps.

Mortgages were over 10% for all of the 1980s. History repeats itself.

@@BenHeckHacks I was going to say as long as you don't mind 7%+ interest rates on secured loans. People are complaining bitterly about the cost of buying cars and homes.

​@@bryanwhitton1784 Rent increases are insane also.

T-bills can be liquidated and in your checking account in 1-3 days if held in a brokerage. I-bonds outside of the one year lock-up can be in your checking account in 2 business days. CDs are a phone call away from being in your checking account. If a person only holds a month or two of emergency funds, it should be able to be at the ready. More than a couple months could be put elsewhere if accessible within a week.

@Posm67 Sounds like an awful lot of hoops to make a little bit more interest on a very small percentage of my net worth. I'm currently getting 5% in a HYSA that I can have transferred to my checking account in a day, can deposit checks directly to it, etc. etc. Again, this is only about 3 months of living expenses. If you're young, and this is a sizeable portion of your net worth, then maybe the mental energy is justified. If it is on the order of 1% to 2% of your net worth, it is hard to justify. It is not justified for me.

That money tied up 5 years now..why not just go with HYSA?..same difference and easy access (edit: I guess if you’re feeling the rates in 5 years will be drastically lower..makes sense then lol)

If I could get close to 5% on a 5 yr CD, I would do that too. Five years out, they could be back to nil. My bank isnt offering anything nearly that good on a 5 yr.

If you want longer term with a federal-backed guarantee and no state or local taxes, look at the new issue 2, 3, or 5-year treasury notes. You get interest payments every 6 months.

@@markritacco270 Thanks - I;ll check them out.

@@endofquoterepeattheline7516 I'm very cautious with investing with retirement just around the corner. I've got emergency funds should I need them.

Shorter term TBills, 4, 8, 17, 26, 52 weeks are all over 5% with no state tax.

or it may not.

I'm certainly not Erin...but the way I look at it is why would I want to pay an expense ratio (no matter how small it may be) for an EFT if you are looking at the fixed income category. If you want to purchase a small amount ($100) you can do it on Treasury Direct or if you want to go with a brokerage house (generally $1000 minimum). There are no brokerage fees and you get 100% of your investment.

you don't get the tax advantage of holding treasuries. That's important if you are in an income tax state or locality.

Annuities certainly have their place, just need to look at the expenses charged with ROE

I can think of one reason the rates will be cut before Nov 5th...

@@danh2716 At that point we know the fix is in.

True but you can do both. I put shorter term money i can’t afford to lose in CDs or t bills and longer term retirement savings in index funds. There’s always FOMO when the market goes crazy but that’s the price i pay for being able to sleep at night

@@murraypassarieu9115 Same here. I still remember 2007-2008 when the market crashed, and people about to retire couldn't anymore because their stocks and retirement funds got destroyed and they had to continue working. I'll take slow, steady, and safe anyday.

The idea is to use these accounts for money you don't want to or can't lose. They can also be part of a bond portfolio. Any money you have to invest for the long term can and should be put into equities. These are for safety and income.

Totally missed the boat on why you buy fixed income.

This is an important point! Thanks. More of an issue when you hold longer-term bonds, of course, and there’s a downside if rates rise and you’re not holding to maturity (see the bank failures last year).

Yeah my capital one apy went from 4.35 to 4.25

The 40-year average inflation rate is about 3.8%, so yes - right now *is* actually normal. The 2% rate of the 2010’s occurred in the wake of the Global Financial Crisis and methinks an unrealistic goal for the Fed.

@@jacksons1010 Well they won’t get back down to 2% by cutting rates. Had I to guess the rate cur decisions this year are more political than economic which is not great.

@@jmagicd9831 That's unduly cynical. The Fed hopes to avoid past errors in holding rates too high for too long. The "soft landing" theory requires action _before_ it becomes obvious that they should've cut; in other words, if they wait until inflation has dropped to 2% it's likely to mean they've already induced a recession.

@@jacksons1010 in the short term, we’d probably be better off allowing a recession to happen since our current economy is so dependent on irresponsible debt driven consumption, and 2010s rates were basically punitive to savers. The current rates aren’t even elevated relative to anything pre 2008

Google searched and 5.25-5.40. currently my CU is offering 5 for a high yield account

If you want longer term with a federal-backed guarantee and no state or local taxes, look at the new issue 2, 3, or 5-year treasury notes. You get interest payments every 6 months.

I like bills and bonds purchased online from treasury direct. There are no local or state taxes on the gains.

nope - you are paid interest by the bank or by the US government for lending them money for that holding period

@@ErinTalksMoney Would you go with My Banking Direct for the 5.55%? I know the backstory as to why they are at that % now so I am wary. I currently have 90K in First Foundation Bank at 4.9%.

Understanding New York Community Bank’s Plunge, and Its Rescue Deal 1 Year 5 Year 5 Year Annualized NYCB -66.82% -67.86% -20.29%

I mentioned this and I see the creator does not reply. I am at 4.9% in First Foundation Bank but have about 90K in there. I am thinking of moving it all into My Banking Direct. I know the story behind why it is 5.55% so I am wary, but I will ask your opinion. What do you think?

@@markritacco270 Would you trust My Banking Direct? I have 90K I was thinkng of moving over to them?

@@DominickSpano The Fitch rating for Flagstar Bank, N.A. (My Banking Direct) is BB+ (as of 3/24) so it seems to be is fairly good shape. The thing with banks especially now is the Commercial Mortgage Back Securities (CMBS) and Mortgage Back Securities (MBS) are going to really hit the fan with especially commercial building vacancies and the owners having to refinace at a much greater rate. All that said I retired early in 2019 at 59 1/2 and took money out of my smallish retirement account until I turned 62 and took SS. In that time and up until then I had a stock, and mutual fund portfolio for 20 years. I had lost plenty of principal through the years and decided this year that I was going to move all of my money to a fixed income (T-bills, notes, MM and a small amount for monthly bills in a HYSA). I refused to lose any more money in the stock market casino. I have zero mortgage and zero debt of any sort, so I am able to still save each month from just SS without taking anything from my investments.

Erin, I liked your rational videos very much. Did you highlight that T-bills are State tax exempt?

@@viveknaik6798 Yes, they are

If you want longer term with a federal-backed guarantee and no state or local taxes, look at the new issue 2, 3, or 5-year treasury notes. You get interest payments every 6 months.

All indications I have seen for the fixed interest rate on Ibonds being announced next month is between 1.2% and 1.4%. As long as the fixed portion remains that high I will keep buying some ibonds. Not having to pay taxes on them until I cash them in is also nice. It is the closest thing to a guaranteed above inflation return you can get and unlike TIPS the lowest an ibond can go to is 0%

@@mikesurel5040 If you do it by the end of the month (April), you will benefit with a slightly higher rate.

😂 Jameson started day care recently …he keeps bringing home these colds haha

@ErinTalksMoney welcome to the parent life. My son got me sick and as soon as I started recovering he got me sick again (like a month ago). Been good since then though haha

huh?

You just need to make sure what you are buying. You bought something named "callable" meaning the institution can and will buy back the instrument whenever they seem to not have it advantage for them.

You can buy call protected CDs. They will have a lower rate than callable CDs, but at least you know you are locked in for the duration of the term.

You’re creepy

I don't see rates going anywhere, neither up or down, this year. And the longer that's the case, the closer we can get to "normal", which would be best going forward. Of course, that's just a guess based on nothing substantial jolting things off course. If Trump wins, all bets are off.

I would expect at least 1 rate cut before the elections. Not because monetary policy indicates that is the correct move, but because politics dictates that's the move the administration needs to have happen.