SIGForum Friends, I need your thoughts on this one please.

Currently my IRA matures later this month and I will be rolling it over. As of today my bank’s IRA and CD rates are as follows:

3 to 5 months - 4.5% APY
6 to 13 months - 4.75 APY

The bank will allow me to decide the length of my next investment period.

With this being an election year should I consider re-investing for 7 months (this would bring the IRA maturity date to October 21, 2024) thus allowing me to re-invest again BEFORE the election?

My thought is by doing this I still get the best rate (4.75 APY) and it allows me to re-invest before the election for a longer term (13 months) in the event the election results cause rates to possibly fluctuate.

I am not sure my thought process makes sense, thus asking for thoughts and comments from the folks here who know a lot more about this than I do. Thanks in advance for your feedback.

That's reading tea leaves and then some.

quote:

Originally posted by sigarmsp226:
Currently my IRA matures later this month and I will be rolling it over. As of today my bank’s IRA and CD rates are as follows:

I'm a bit confused by your terminology.

IRAs don't have rates, and they don't mature. They're just a type of retirement investment account. (Individual Retirement Account)

You use the money within an IRA to invest in things. The IRA itself isn't an investment.

So it sounds like you're investing in CDs from your bank within your IRA retirement account?

Understand that 4ish percent is a bit lower than usual for CDs right now... It's easy to find 5+% CDs, and there are even some banks offering 6+% CDs currently.

And most folks will invest in options with even higher rates of potential return than that within their IRAs, such as stocks, bonds, or mutual funds.

quote:

Originally posted by 220-9er:
That's reading tea leaves and then some.

I know (Ha-Ha) but did not know if there was a historical pattern related to interest rates and Presidential election years.

My thought would be that WHEN President Trump gets re-elected one of his primary focuses is to start working on the economy. I know this will take time but my thinking is rates “could” start dropping as he started fixing what Biden broke.

Rogue - Thanks for questioning my terminology. I am invested in an IRA account with my bank. My fault for using the CD rate language.

I will check around related to the better rates. Appreciate your feedback.

The FED sets the basic funds rate, which then indirectly affects all the other interest rates. The FED is a non-governmental entity that operates independently. Thus the President has no direct authority on the interest rates.

There is a lot of speculation and differing opinions right now on what the FED will do this calendar year. The predominant expectation is they will reduce the rate by about 3/4ths of a percent by the end of the year. But, there are reports of persistent inflation, which would suggest they will not reduce at all, or perhaps less of a reduction or postpone the reduction. So, bond rates and thus CD rates will probably be a bit lower by election day, a fraction of a percent.

There is speculation that the FED will have to raise rates to further fight inflation. This is the 1970's style stagflation situation. And then there's the group that believes the FED will have to further drop rates to reduce the cost of our federal debt.

Historically, the stock market tends to perform well in Presidential election years, but there are exceptions which include when the economy was bad. So my guess is the stock market performance depends a lot on what happens in the Democratic convention (i.e. do they dump Biden or not). If Trump is elected, the stock market probably goes up, based on hope of a good economy. If the Dems nominate someone who looks like they could win leading up to the election, the stock market might go down, and thus the bond market go up. All of that would be based on emotion and guesses and probably market manipulation.

And an up stock market suggests a downward bond market. And that suggests CD rates decrease.

So, flip a coin! Rates may go up, they may go down.

The sweet spot in government t-bills is 3 month bonds right now. Short term is favored by investors. Going out to a year or more brings a lower return than 6 months or shorter. Which tells you that investors are confused or worried or uncertain about longer term economic situations. So their strategy is get what they can now, and then redeploy the money in whatever looks good in 3 or 6 months.

Tying up money more than a year doesn't make sense to me right now. But I also don't think trying to time the bond market with the election is a good strategy. Your bonds or CDs should be the lower risk part of your retirement portfolio, with an eye to longer term steady returns. Trying to time the market is gambling, and that is risk.

I would go for the best rate I could get, looking at about 6 months to a year.

Fwiw, my retirement bonds are in bond ladders, equally in 3 month, 6 month, and 12 month t-bills. 1/12th of the total matures each month, and I roll into new t-bills the same way. You can build a CD ladder, which is much like dollar cost averaging buying stocks. It removes the risk of bad timing.

Fly-Sig - Thank you Sir for providing additional detail related to my question. Greatly appreciate you also taking time to help me better understand the logic behind rates and their current uncertainties. I will inquire about the ladder bonds you kindly mentioned also. Thanks again to you and the others that are trying to help me.

quote:

Originally posted by sigarmsp226:

quote:

Originally posted by 220-9er:
That's reading tea leaves and then some.

I know (Ha-Ha) but did not know if there was a historical pattern related to interest rates and Presidential election years.

My thought would be that WHEN President Trump gets re-elected one of his primary focuses is to start working on the economy. I know this will take time but my thinking is rates “could” start dropping as he started fixing what Biden broke.

Except that, in a desperate attempt to not be ousted from office, the current pretender in chief alread is "working on the economy." Don't count on the current administration to do anything that will cool things off, as Clinton famously remarked, "ot's the economy, idiot." Whether or not the current over-spending and "stimulus" efforts ricochet before or after the election, Biden and his handlers are not going to do anything to make it happen sooner (if they can help themselves). Rather, they are counting on things to implode after Trump wins in Nov. A republican administration will attempt an austerity/workout solution, the Dems will try to inflate, tax, and spend their way out of debt. And, yes, the poor taxpayer (and investor) is going to be royally screwed either way.

Fly SIG is right, investments may do better or they may do worse.

Trying to time the market with the information available is folly.

Come up with a viable investment and savings plan and stick with it.

I am a like the poster above who doesn't understand what you are actually invested in. CD's? You may want to look more at what the components of your investments are than trying to predict interest rates over the next few months.

quote:

Originally posted by jhe888:
I am a like the poster above who doesn't understand what you are actually invested in. CD's? You may want to look more at what the components of your investments are than trying to predict interest rates over the next few months.

This.

quote:

Originally posted by sigarmsp226:
Rogue - Thanks for questioning my terminology. I am invested in an IRA account with my bank. My fault for using the CD rate language.

You have an IRA account, but that is not what you are invested in. So what is the money within your IRA account invested in? Just CDs alone?

If so, I would strongly recommend speaking with a fiduciary financial advisor about whether investing all your IRA money into CDs is the best option for your situation. That very likely is not the case, and it could be better to roll some or all of your bank IRA money over into an IRA with a brokerage that offers more/better investment options, for example. (And now would be the time to do it, when your existing CDs have matured and you're not facing penalties.)

Note that the guy who deals in CDs at your bank may title himself an "advisor", but that is not the type of financial advisor I'm talking about. You want an independent advisor who works for you, not the bank, to help you decide the best course to plan for your retirement.

Read what rogue said. Then read it again.

Got it guys and Thank You.

What Rogue said is 100% correct. I just spoke with the person who set up my IRA and he is investing it all in CD’s.

My next call will be to set up a call with a real financial advisor at Fidelity Investments to gain an understanding of my options. My situation is a little messed up because of how I left my last job (after 32 years) with initial plans to retire, but then that changed. The good news is my 401k was transferred to an IRA account.

Thanks guys for pushing this back at me to understand what I was missing. I did not get it at first but after this thread and a phone call to my local banker I realized I am currently on the wrong pathway. Thanks again for taking time to help me understand.

Good for you!

Please understand it is not the job of an advisor to prevent you from losing any money over a time period. At minimum he should want to know your goals, time frame, and tolerance for risk (as in how much/what percentage are you comfortable losing over a time period with the usual market swings). When considering investments like mutual funds and ETFs it is easy to find "past" performance by year, periods of years, bear market performance, and such.