How Much To Keep In A Bank?

OneEyedDiva

OneEyedDiva

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New Jersey
What percent of assets (not counting a home) do you think should be in a bank account when a 70 year old person's expenses are covered by pension and social security with money left over to save/invest?
 

Since I manage the money with my wife in agreement, bank use is for a place to have the pension, soc. sec. and RMD's deposited. Electronic in, electronic out to pay the bills. What we consider to be excess is transferred to a money market account in my wifes name where she has her portfolios. By excess I mean all above what is in the bank to pay the bills and available via an ATM for whatever we want to do for fun. The accounts are set up to automatically transfer to the surviving spouse, I expect her to outlive me so the setup is to eliminate a delay in paperwork.

I credit my wife with decision making about our future when we were in our mid 30's. Due to her determination we live well. Like always though value for the money spent is foremost. Right now with pensions, soc. sec. and the RMD [required mandatory distribution] from our traditional and self directed IRA portfolios the 8 sources of income far exceed what we made during our years working.
 

My Pension and Social Security don't cover my expenses and I'm very insecure about money so I keep approx. 25% in cash.

It costs me quite a bit in lost opportunity but it's an expense that I'm willing to bear.

Cash gets the job done when the going gets tough.
 
I certainly can't add much info on this because I'm not sure. I can say that I learned my lesson about keeping money in long term CD accounts. The hubby and I were going along quite nicely on our social security checks and a small amount of interest from his retirement fund. Our home is paid for and so far no horrible health issues. In 2000, my Mom passed away and left me an inheritance of a moderate sum of money. Because we didn't need it, and I am deathly afraid of stocks or anything risky, I kept putting it in CD's. Of course the interest dropped to next to nothing so when they matured I put them in a longer term for a better interest rate. I guess I was thinking I would last forever. 3 months ago I needed new hearing aids which were almost $5000.00. This was quite a chunk to come up with all at once. There is a very high penalty for taking the funds early. Luckily a CD matured and I was able to get the money for the new aids. Now I am going to have to figure out what to do as the other two I have mature. I know if I put it in stocks I will never sleep again and the interest rate for money markets is so low.
 
Ruth & others with time to think about what is right for yourselves.


When it comes to stocks and investing only you know what you can risk. Tips and advice offered on the internet IMO not a good way to decide your financial fate.

But for the sake of pointing out the differance between CD's & a quality company I'll use this example.

Dividends - Duke Energy
This is the 90th consecutive year that Duke Energy has paid a quarterly cash dividend on its common stock.
https://www.duke-energy.com/our-company/investors/stock/dividends-duke-energy

Next would be capital gains.
Back in the year 2000 DUK was selling at around $25.00 a share. A $5000.00 purchase would have bought you 200 shares. In 16 years the reinvested dividend would have bumped that amount up some but for the sake of this example I'll leave the 200 shares as the represented amount to draw from. I purposely wrote draw from. That is explained in the last paragraph.
Original cost $5000.00 = 200 shares

CLOSE 4:02 PM EDT 04/06/17
$82.59 USD
http://quotes.wsj.com/DUK

200 X 82.59 = $16,518.00

Selling enough to cover the cost of your hearing aids would leave you with stock, about $11,000.00 dollars worth. If not needed that residual amount would be increasing due to dividend reinvesting. In other words a nice nest egg for emergencies.

Tolerance for risk, research and goals drive the choices we make.
 
enough to cover a month or two's bills at the least .

with a fraud attempt on our fidelity account it was shut down for more than 2 weeks . good thing we had a local bank to get money and pay bills from
 
Ruth n Jersey said:
I certainly can't add much info on this because I'm not sure. I can say that I learned my lesson about keeping money in long term CD accounts. The hubby and I were going along quite nicely on our social security checks and a small amount of interest from his retirement fund. Our home is paid for and so far no horrible health issues. In 2000, my Mom passed away and left me an inheritance of a moderate sum of money. Because we didn't need it, and I am deathly afraid of stocks or anything risky, I kept putting it in CD's. Of course the interest dropped to next to nothing so when they matured I put them in a longer term for a better interest rate. I guess I was thinking I would last forever. 3 months ago I needed new hearing aids which were almost $5000.00. This was quite a chunk to come up with all at once. There is a very high penalty for taking the funds early. Luckily a CD matured and I was able to get the money for the new aids. Now I am going to have to figure out what to do as the other two I have mature. I know if I put it in stocks I will never sleep again and the interest rate for money markets is so low.
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Knight said:
Ruth & others with time to think about what is right for yourselves.
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Knight said:
When it comes to stocks and investing only you know what you can risk. Tips and advice offered on the internet IMO not a good way to decide your financial fate.

But for the sake of pointing out the differance between CD's & a quality company I'll use this example.

Dividends - Duke Energy
This is the 90th consecutive year that Duke Energy has paid a quarterly cash dividend on its common stock.
https://www.duke-energy.com/our-company/investors/stock/dividends-duke-energy

Next would be capital gains.
Back in the year 2000 DUK was selling at around $25.00 a share. A $5000.00 purchase would have bought you 200 shares. In 16 years the reinvested dividend would have bumped that amount up some but for the sake of this example I'll leave the 200 shares as the represented amount to draw from. I purposely wrote draw from. That is explained in the last paragraph.
Original cost $5000.00 = 200 shares

CLOSE 4:02 PM EDT 04/06/17
$82.59 USD
http://quotes.wsj.com/DUK

200 X 82.59 = $16,518.00

Selling enough to cover the cost of your hearing aids would leave you with stock, about $11,000.00 dollars worth. If not needed that residual amount would be increasing due to dividend reinvesting. In other words a nice nest egg for emergencies.

Tolerance for risk, research and goals drive the choices we make.
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stocks are stocks no matter how they distribute your own money back to you . if the op does not want to be in stocks the fact a stock gives you back a piece of your investment dollars without you having to sell a piece does not change a thing .

in fact you keep hearing about just buy the dividend aristocrats .

what constitutes this group changes all the time so get ready for lots of selling trying to keep up as they get bumped and replaced AFTER THE FACT THEY DID NOT LIVE UP TO EXPECTATIONS . you could be behind the curve here very easily .

these dividend aristocrats are not somehow immune to all the things that effect company's and stocks . Just like other companies, their outcomes change.

in 2009 there were 52 stocks that met the group’s strict criteria.

As of 2012, there were 51.

But of those 51, 13 were different than the original set. So over the course of just 3 years, there was a 27% change in the group’s composition.

in fact going back to 1989's list :

Of those 26, seven are still on the list today, ten were removed because they either cut or froze their dividend, four were removed for an unknown reason, and the remainder were aquired at some point. So at least ten of the 26 had an outcome that is different from the assumption of dividend growth every year through thick and thin.

dividend stocks are a fine investment vehicle, but one needs to practice reasonable diversification and also own some high-quality bonds when in retirement. dividends are not a substitute for interest bearing instruments . they are stocks ,plain and simple . . i never recommend anyone , not in to investing ,buy any individual stocks , ever . market and interest rate risk is more than enough without taking on individual company risk too . especially for someone risk averse.

there are enough ways to structure a conservative diversified portfolio without taking on the whims of a particular company . some models can even profit in a recession or depression as well as prosperity so the outcome of markets does not matter that much .

i have about 37% in a portfolio that is pretty much bullet proof. that is my last line of defense . it can profit no matter what happens . it strives to generate positive real returns whether a recession or high inflation .

the other 63% is broken up in to 3 different portfolio's .

a short term income oriented portfolio for current spending , a growth and income model for 6-10 years out and a growth model for eating in 11-30 years . that lets me optimize the investments for each time frame .

then i just keep a small piece for my playing and speculating in individual company stocks i short term trade for quick profits . more fun than serious investing .
 
mathjak107 said:
stocks are stocks no matter how they distribute your own money back to you . if the op does not want to be in stocks the fact a stock gives you back a piece of your investment dollars without you having to sell a piece does not change a thing.
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True.
Pointing out potential is not the same as giving advice to purchase dividend aristocrats.
I wrote this before using DUK as an example.
Quote
"When it comes to stocks and investing only you know what you can risk. Tips and advice offered on the internet IMO not a good way to decide your financial fate."

I think many that access this site can look at our input and see value in both posts. Risk vs. reward is something each has to weigh for themselves. I'm pretty sure everyone understands there is no sure bet when it comes to the stock market.

We began investing about 46 years ago and had some bumps along the way. But overall success due to investing as I posted has us living well. There is a calculator that projects when a MRD will be fully paid. My two MRD's will be empty when I reach 128 years old, my wifes are a little longer.
 
Ruth n Jersey said:
I certainly can't add much info on this because I'm not sure. I can say that I learned my lesson about keeping money in long term CD accounts. The hubby and I were going along quite nicely on our social security checks and a small amount of interest from his retirement fund. Our home is paid for and so far no horrible health issues. In 2000, my Mom passed away and left me an inheritance of a moderate sum of money. Because we didn't need it, and I am deathly afraid of stocks or anything risky, I kept putting it in CD's. Of course the interest dropped to next to nothing so when they matured I put them in a longer term for a better interest rate. I guess I was thinking I would last forever. 3 months ago I needed new hearing aids which were almost $5000.00. This was quite a chunk to come up with all at once. There is a very high penalty for taking the funds early. Luckily a CD matured and I was able to get the money for the new aids. Now I am going to have to figure out what to do as the other two I have mature. I know if I put it in stocks I will never sleep again and the interest rate for money markets is so low.
Click to expand...
Ruth one of the rules of investing is that one has to do what makes him/her comfortable. If you feel that investing in stocks would make you that uneasy, then you shouldn't do it. BUT if you ever decide to get your feet wet, a safer way to do it with a bit less risk is to invest in ETF's or mutual funds that have a tried and true very good returns, not that the same level of returns is guaranteed. Because over time, even with downturns, stocks (and I am including ETFs & mutual funds here) have still come out ahead. I have a friend who got burned in the last bear market so he keeps talking about taking a lot of money out and adding it to his already high bank balance. (From what he told me, his former broker really messed up). So now having more in his bank account is what will make him feel comfortable and more secure. Even though he has a broker he feels more confident in now, I will not try to talk him out of giving up those higher returns for the returns CD's pay. BTW, the advice I always read about CDs is to layer the maturity dates so you're not stuck waiting for [them] to mature.
 
OneEyedDiva said:
Ruth one of the rules of investing is that one has to do what makes him/her comfortable. If you feel that investing in stocks would make you that uneasy, then you shouldn't do it. BUT if you ever decide to get your feet wet, a safer way to do it with a bit less risk is to invest in ETF's or mutual funds that have a tried and true very good returns, not that the same level of returns is guaranteed. Because over time, even with downturns, stocks (and I am including ETFs & mutual funds here) have still come out ahead. I have a friend who got burned in the last bear market so he keeps talking about taking a lot of money out and adding it to his already high bank balance. (From what he told me, his former broker really messed up). So now having more in his bank account is what will make him feel comfortable and more secure. Even though he has a broker he feels more confident in now, I will not try to talk him out of giving up those higher returns for the returns CD's pay. BTW, the advice I always read about CDs is to layer the maturity dates so you're not stuck waiting for [them] to mature.
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Good advice!

The old idea of not investing money that you will need in the next five years or that you can't afford to lose is still valid, as we get older we don't have the time or extra money to correct our mistakes.

Buying ETF's, no load index mutual funds, no load balanced funds are a great way to participate in the market. I would go with a low cost broker like Vanguard, select a fund and make the minimum investment required then gradually add to it every month or when I got a small windfall of some kind. Consider skimming the interest on your CD's when they mature and investing that money, then renew the certificates original amount. I would not take my life savings and just plop it into the market. Finally if the whole idea of the market makes you uncomfortable then just keep doing what you know works for you. In a few years it won't matter if any of us were in or out of the market, LOL!

Good luck!
 
Aunt Bea said:
Good advice!

The old idea of not investing money that you will need in the next five years or that you can't afford to lose is still valid, as we get older we don't have the time or extra money to correct our mistakes.

Buying ETF's, no load index mutual funds, no load balanced funds are a great way to participate in the market. I would go with a low cost broker like Vanguard, select a fund and make the minimum investment required then gradually add to it every month or when I got a small windfall of some kind. Consider skimming the interest on your CD's when they mature and investing that money, then renew the certificates original amount. I would not take my life savings and just plop it into the market. Finally if the whole idea of the market makes you uncomfortable then just keep doing what you know works for you. In a few years it won't matter if any of us were in or out of the market, LOL!

Good luck!
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Aunt Bea. I asked the question because I'm still contributing to bank and non-IRA accounts. I read an article that reminded me that if I continue my planned ratio I'd be putting far too much in a pittance interest bearing savings account (basically paying .001) as opposed to my investments which have done well, even in downturns. I'd describe myself as moderately aggressive. I don't panic when the markets go crazy because they always bounce back and I may never need to take money out. I'm Muslim and we do not deal in interest...we're (not supposed to) pay it or charge it, so CDs are out, so are bonds. But we can have dividend and capital gains paying equity investments (which I favor) as long as they are not in industries like porn or gambling. No pig farms either. :) I have Vanguard accounts as well as with three other brokerages, all of which have more user friendly websites than Vanguard.
 
OneEyedDiva said:
Aunt Bea. I asked the question because I'm still contributing to bank and non-IRA accounts. I read an article that reminded me that if I continue my planned ratio I'd be putting far too much in a pittance interest bearing savings account (basically paying .001) as opposed to my investments which have done well, even in downturns. I'd describe myself as moderately aggressive. I don't panic when the markets go crazy because they always bounce back and I may never need to take money out. I'm Muslim and we do not deal in interest...we're (not supposed to) pay it or charge it, so CDs are out, so are bonds. But we can have dividend and capital gains paying equity investments (which I favor) as long as they are not in industries like porn or gambling. No pig farms either. :) I have Vanguard accounts as well as with three other brokerages, all of which have more user friendly websites than Vanguard.
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OED, I didn't know that Muslims don't deal in interest. I learned something today, thank you for that!
 
Aunt Bea said:
OED, I didn't know that Muslims don't deal in interest. I learned something today, thank you for that!
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Aunt Bea...interest, known as Riba is considered to be evil because thousands of years go, it kept the poor people poor and made the rich people even more rich. We have but to see today what exorbitant interest rates are doing to people. Some are losing their homes, others are mired in credit card debt. Islam has a system in place whereby people can borrow money interest free to buy a home, for instance. I don't know how available that system is here in the west though. There are some exceptions with modern society being what it is as to under what circumstances and how much interest is acceptable. It is suggested that we donate any interest we've accumulated to a non Muslim charity.
 
We only have a checking account at the bank. Our pensions and social security are direct deposit and I receive one small check each month which I take to the bank to cash. We don't spend much so the checking account builds up over time. When it gets above 5 thousand I'll start looking at the stock market to see what to do with the excess. Then I'll have my financial advisor buy whatever stock I decide on and I'll withdraw that amount from my checking.
 
My husband is 77 and I just turned 71. We have been retired since 2001. We had investments way back when but lost most of it in 2008 when everything went down hill. Since we've been living on his pension and our SS we haven't re-invested because we're afraid of losing it again. We didn't buy a house until we were in our 50's because his work kept us moving around so we're still making a house payment and a car payment. After monthly bills are paid (usually no credit card debt) we have about $1500 that I am able to keep around with $500 in cash and the rest goes in a savings with Ally, which is earning interest over 1% right now.

I've thought about mutuals but isn't it a little late for us to start investing since it takes forever to see a return?
 
it takes forever to see a return ? what do you call 2008 until now ? markets tripled .

bad investor behavior lost your money by bailing , not markets .

but at this point i think no more than a 30/70 mix is appropriate. even something like the fidelity insight income model from the fidelity insight newsletter would be good . it is about 27% equities and 65% less volatile than the s&p 500.

it returned 6.50% last year and is about 75% assorted bond funds ,. it holds mostly bond funds that are less sensitive to rate increases .

i use that and the current year in a bank and money market for spending this new year .

any money i need in 20-30 years to eat is in a 60/40 growth and income model . at 71 you still have money you will not eat with for 20- 25 years god willing .that is still long term money.

the question is really how much are you drawing off this to live ? that really determines what you need to do .
 
mathjak107 said:
it takes forever to see a return ? what do you call 2008 until now ? markets tripled .

bad investor behavior lost your money by bailing , not markets .

but at this point i think no more than a 30/70 mix is appropriate. even something like the fidelity insight income model from the fidelity insight newsletter would be good . it is about 27% equities and 65% less volatile than the s&p 500.

it returned 6.50% last year and is about 75% assorted bond funds ,. it holds mostly bond funds that are less sensitive to rate increases .

i use that and the current year in a bank and money market for spending this new year .

any money i need in 20-30 years to eat is in a 60/40 growth and income model . at 71 you still have money you will not eat with for 20- 25 years god willing .that is still long term money.

the question is really how much are you drawing off this to live ? that really determines what you need to do .
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Where were you in 2008 when I needed you??? haha. I've always been good at saving but I never understood (and still don't!) investments. My parents lived paycheck to paycheck and my mother was a saver but we never had any money left for investing. I worked from 19 years old to 62 and once again it was live from paycheck to paycheck. We had an adviser in CA in the 80's but no one after 2008. We had very little left and we were afraid of losing any more so we withdrew it from our mutuals and never invested again. We know we should have just bit the bullet and left it but we didn't. My husband is not very good with money. He can hoard it like crazy but he's clueless about investing...like me. I will check out Fidelity...thanks.
 
as i always say , you don't need to know everything or even anything .you just need to know who the smarter people are .

i can put portfolio's together in my sleep but i have used a newsletter for 30 years to keep me from myself .

i am never happy being average at anything and i would always tinker and try to beat the markets at their own game. i would always plot my next move and 2nd guess the last one .

then i came upon the fidelity insight newsletter and i gave them a try calling the shots .

all the burden was off me now . i no longer had to have the weight of what to do on my shoulders .

so when 2008 came they held our hands and kept us from bailing out when there was a fire and everyone else was running for the exits . the burden was not on us to decide to flee or not .so with that we rode it out and are now higher than ever . we have been spending more than 6 figures for 3 years now while i delayed ss . i just took ss in october at 65 . but we are higher today than the day i retired .

so discipline is key , not finding some magical investment
 
Colleen said:
Where were you in 2008 when I needed you??? haha. I've always been good at saving but I never understood (and still don't!) investments. My parents lived paycheck to paycheck and my mother was a saver but we never had any money left for investing. I worked from 19 years old to 62 and once again it was live from paycheck to paycheck. We had an adviser in CA in the 80's but no one after 2008. We had very little left and we were afraid of losing any more so we withdrew it from our mutuals and never invested again. We know we should have just bit the bullet and left it but we didn't. My husband is not very good with money. He can hoard it like crazy but he's clueless about investing...like me. I will check out Fidelity...thanks.
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what is the draw rate you are pulling from your own resources ?
 
mathjak107 said:
what is the draw rate you are pulling from your own resources ?
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OK...I'm not too smart, so you have to speak English...haha. If you mean...what are you withdrawing from savings to live, the answer is nothing. We have not touched our savings. As we get older, who knows what's ahead and even though we are in good health (thank you, God!), life is unpredictable.
 

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