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Concord bank offers a 100-year CD
- Woodi 3y agoSeriously ? "Fixed %" ?? Even that papers that bringed Silicon Bank down was better - covers 15% of inflation...
- WheelsAtLarge 3y agoThis is a nice alternative to an annuity. It's actually better since you will get your principle back. You can gift it to someone or use it as a way to finance you retirement and be sure of the regular income for a very long time. You can even put it in your Will.
- koolba 3y agoFDIC insurance would be the real gain here. That’d cover accrued interest as well. 4.75% perpetual FDIC insured CD vs 30 year treasuries paying about 3.8% right now is interesting.
- ghaff 3y agoA number of very large brokerages have short-term largely treasury accounts returning in the 4-5% range right now. I wouldn't toss all my money there but it seems like a pretty good place to park cash for the next year or two until rates drop.
- mlyle 3y agoThere's a 10 year interest penalty for early withdrawal.
- ghaff 3y agoThat doesn't seem like a good deal at all then. The brokerage accounts are basically "like cash" sweep accounts.
- mlyle 3y agoThe deal is in locking in the interest rate forever. Of course, this is only a great deal if the money is taxed at a very low rate and your horizon is very, very long.
- koolba 3y agoShort term treasuries are paying more than that. 6 month is at about 5.3% and that’s State tax free. Bond yields can only be compared apples to apples at similar durations and at similar credit risks (which FDIC insurance normalizes).
- u801e 3y agoWhat's interesting is that until very recently, the interest rate on treasury bills were higher for shorter term ones versus longer term. That is, the 4 week ones had a higher interest rate compared to the 26 week ones. In fact, the daily treasury bill interest rate for May 26, 2023 was 5.78% for 4 weeks 5.30% for 8 weeks 5.16% for 13 weeks 5.28% for 17 weeks 5.18% for 26 weeks 4.98% for 52 weeks [1] https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_bill_rates&field_tdr_date_value=2023 https://home.treasury.gov/resource-center/data-chart-center/...
- kasey_junk 3y agoThis is the famous inverted curve. It’s generally been a predictor of recession. But this time it’s been inverted for over a year with no recession (yet). One of the many baffling parts of the economy currently.
- pgwhalen 3y agoThe yield curve inversion to recession lag is typically around 18 months (with big error bars), so it’s not super notable yet.
- IAmGraydon 3y agoLocking yourself into an interest rate for a long time period right now is like buying the stock market at the top. Get a high interest savings account with Wealthfront at 4.55%, for example. You’ll be glad you did when rates hit double digits over the next decade. Rates aren’t going back to zero ever.
- iakh 3y agointerest rates have been falling for over 700 years [1]. I wouldn't bet against that over a single unprecedented year 1. https://www.bankofengland.co.uk/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018 https://www.bankofengland.co.uk/working-paper/2020/eight-cen...
- thegaulofthem 3y agoIt is more than a single year and this happened during the 1970’s and 1980’s stagflation era. Of course worse inflationary crises have happened in Western history and while they returned on a large enough time scale that really didn’t matter all to much for all the poor citizens for whom their hard earned wealth was nukes from orbit.
- Mat3777 3y agoIsn't this cherry picking data?
- fragmede 3y agoYour time machine is as good as mine. Rates can keep going up and up and up like the 70's, or they could crash back down when AI and robots put us all out of jobs, or the dollar could become worthless along with everything else after a nuclear holocaust.
- dc_rog 3y agoYou can do both to hedge that interest rate risk. Some fixed, some floating. No one knows where rates are headed and savings account providers can change rates at any time.
- rising-sky 3y agoIt’s capped at 150,000 so not much in terms of income. Article doesn’t specify if this cap is per account or individual
- toomuchtodo 3y agoProbably best not to exceed FDIC limits for a novel bank product.
- charcircuit 3y agoA CD isn't novel.
- toomuchtodo 3y agoA 100 year CD is, from the first new mutual bank in the last fifty years.
- charcircuit 3y agoDoing the same thing but longer isn't novel.
- readthenotes1 3y agoTry telling that to the world's oldest person!
- deelowe 3y agoFDIC insurance is by account, not individual.
- toomuchtodo 3y agoMy point was that this is somewhat of new and exotic product, and interested parties should be mindful to ensure their exposure does not exceed insurance limits. While you might find a way to buy more of this CD than the bank permits through their limits, that doesn't necessarily mean you should. https://www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance/ https://www.fdic.gov/resources/deposit-insurance/brochures/d... > The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. > The FDIC provides separate coverage for deposits held in different account ownership categories. Depositors may qualify for coverage over $250,000 if they have funds in different ownership categories and all FDIC requirements are met. > All deposits that an accountholder has in the same ownership category at the same bank are added together and insured up to the standard insurance amount.
- golem14 3y agoWhat good is it to get the principal back in 100 years ? If inflation stays between 2 and 3%, the principal would only be worth between 5 and 13% of what it is today. If inflation is between 4 and 5%, principal in 100 years would be worth between 0.7and 2% of todays value.
- vineyardmike 3y agoPeople buy annuities for the guaranteed income. That's an existing product people want. Annuities get ~5% interest, and when you die you usually forfeit the principal. It's also not FDIC insured. This CD is 4.75%, FDIC insured, and you get the principal back. It's superior to an annuity for a good chunk of people. Sure the principal degrades in post-inflation buying power (excluding the interest payments), but that's not the point because it's competing with $0.
- alexpotato 3y ago> but that's not the point because it's competing with $0. If the option is "Buy the CD or do nothing" though, correct?
- snypher 3y agoI believe it's [buy this CD, buy an annuity]
- soligern 3y agoCan you withdraw the interest penalty free before the term is up?
- vineyardmike 3y agoThe interest can either add to the principal or be a regular distribution.
- monomers 3y agoWith global population stagnating in the coming decades I wouldn't bet on inflation staying the same. I think it's more likely that we are headed into a deflationary crisis worse than 1930 Germany.
- benj111 3y agoHow does inheritance tax treat this annuity? Are you landing your loved ones with a tax bill without liquid assets to pay it off.
- pram 3y ago“Walden Mutual, which opened last year“ Mmmhmm, I’ll pass.
- mlyle 3y agoIt's insured, so...
- deleted 3y ago[deleted]
- 005 3y agoOnly for $250K though?
- kasey_junk 3y agoYou can only buy 150k worth.
- mlyle 3y ago(And interest can be withdrawn penalty-free at any point, so you can keep it under $250k).
- screamingninja 3y ago> Note that in the case that you withdraw the CD before 10 years, the penalty would reduce the principal value of the CD.
- mlyle 3y agoGuessing at what you're trying to say and responding accordingly: You don't get an early withdrawal penalty from your bank failing. It's only if you electively withdraw the funds.
- zie 3y agoThey are not the only ones doing long term fixed income like this, I wonder what's with the sudden interest in everyone jumping on offering stuff like this. The duration risk is ridiculously high though. Personally, I'd want 15-20% yield for that sort of risk.
- Spooky23 3y agoIt’s a CD, so the only risk is the interest penalty for early termination. There’s no principal risk for $250-500k. My dad saved like this for my siblings and I with savings bonds.
- zie 3y agoThere is duration risk, i.e. interest rates will certainly change over the next 100 years. Will they go up or down, yes. Will they stay on average higher than this CD or on avg lower? shrugs nobody knows. Hence duration risk. You are talking about credit risk, i.e. loss of principal. Since they are FDIC insured, you are correct there is no principal risk, if the bank folds, you will either get your principal back or the new owners will continue to honour the CD.
- Spooky23 3y agoIf the circumstances warrant, you just exit.
- zie 3y agoAssuming you can swallow the fee(s). I haven't looked at the details, but usually exit fees get bad unless you hold close to duration, which in this case would be most of your entire life. If they are doing this without exit fees, I'd be VERY surprised.
- CameronNemo 3y agoThe early exit penalty is the last 10 years of interest.
- dataflow 3y agoWhom is this a good deal for? 1.045^40 is less than 6, so you'd get back a 6x return after like 40 years if you don't touch the money? Even with the full $150k you end up with $1M which hardly seems like anywhere near enough to sustain you in retirement in 2063.
- georgeg23 3y ago1.045^100 = 81x. That sounds more impressive, as inflation over the last hundred years is only 17x. If you withdraw at 40 years you only get 30 years worth (lose ten years of interest according to their terms).
- mlyle 3y ago> 1.045^100 = 81x. That sounds more impressive, as inflation over the last hundred years is only 17x. Viewed another way, though, if inflation is the same, "you'll" get 4.7x in real money at the end. On the other hand, you'll be paying tax on that interest, so you are likely to be losing money in absolute terms. A nonprofit might find it attractive, though.
- georgeg23 3y agoI think it's an exaggeration to say you'd be losing money after taxes.. it's still at least 3x, but point taken.
- mlyle 3y agoSay I open a 1 year CD at 5% interest with $100. Say inflation is 3%. I will get $5 of interest. The original $100 would be worth $103. I'd better pay less than $2 of taxes on that $5, or I'd be losing money in absolute terms. If my total marginal tax rate is 30%, then I'll pay $1.50 in taxes, and yield .5%; after 100 years then you'd have 1.6x the money. If my total marginal tax rate is 40% -- say 32% federal + 8% California-- then I'm breaking even. The same logic holds for longer term CDs, as you're paying taxes on interest accrued each year.
- belval 3y ago> Like most CDs, this one, which has a 4.75% interest rate I am not familiar with CDs, but how can an establishment promise returns of 4.75% for 100 years? That seems exceedingly high. What if there is deflation in 2055 or a recession that sends the rates back to 1-2%?
- trhr 3y agoI wouldn't worry about it. For every 1% they pay you, they're lending the same money out a half-dozen times at 3-4%.
- kasey_junk 3y agoA loan to deposit rate of 6x would be seen by bank investors as shockingly bad. Like near insolvent. The average rate in the US is currently .6. Bank investors get antsy at .8 (prior to 2008 .9 was considered the line).
- photonerd 3y agoThat’s why synthetic CDOs started: to create a whole derived market from loans that didn’t rely on loan to deposit ratios. It led to the 2008 crash but they learned nothing.
- kasey_junk 3y agoCDO’s are generally no longer held by banks. The closest derivative are CLOs and the bank with the biggest exposure to them I could find was JP Morgan Chase who holds less than 0.5% of their assets in them. They owe more than 40x in deposits than they hold in CLOs. In no way does a bank holding CLOs on their balance sheet validate the idea that they are loaning out their deposits 6x. That simply doesn’t happen with well run banks and people espousing that it does largely don’t understand banking.
- photonerd 3y agoRight, I wasn’t saying it was a current vehicle, nor trying to bolster the 6x claim. I’m just pointing out that doing stupid financial shit that is effectively the same as that kind of over-leveraging us hardly new, nor raised many eyebrows. Banking trades will seek the most ways to make money possible. Before CDOs were the poison they are today they allowed 50x effective leverage
- ericpauley 3y agoThe article doesn’t say but I’m assuming it’s callable, in which case it’s all loss and no gain since they can just refinance it when rates go down.
- eatbitseveryday 3y agoRead the bank's main announcement. > Can the bank redeem the CD early? (Also known as a “callable CD”) > No. Only the account holder can choose to redeem the CD prior to maturity (with applicable penalty for early withdrawal).
- deleted 3y ago[deleted]
- quickthrower2 3y agoWhat happens if USA joins the Euro in 2088?
- InitialLastName 3y agoThis may be a glib question, but I am curious about this: what happened to pre-Euro-currency-denoted financial instruments when the currency was supplanted by the Euro? Did they immediately convert at a defined conversion rate? Did they continue yielding and convert upon interfacing with hard currency? Was there (I assume there wasn't) a biblical jubilee where all debts were reset?
- mnd999 3y agoThat's remarkably specific, have you secretly invented time travel?
- anticensor 3y agoNot much. They would just redenominate it in Euro.
- kingforaday 3y agoI'd be interested to know their math model expecting a certain percentage to not have a beneficiary exercise it once the original account holder passes away.
- prepend 3y agoThey aren’t able to keep it. Even if no beneficiary, the state collects it in an unclaimed accounts fund so there’s no benefit to the bank. Imagine the incentives and nightmare if banks were able to keep unclaimed accounts from people.
- pests 3y agoYou can in fact look on your states unclaimed property website to see if you have been owed anything by companies over the years that wanted if off their books and relinquished it to the state. I had $70 from a Google Ads account from when I was a teenager I found on there.
- cm2187 3y agoWith rates at 5%, duration of a 30y bond: 15y, 50y bond: 18y, 100y bond: 20y. In other words you barely get any duration benefit for a 100y bond over a 50y bond because anything beyond 50y is so heavily discounted it doesn’t matter. There isn’t really any reason to buy that beyond the cool factor.
- sigmar 3y agoThere's a 10 year interest penalty for early withdrawal. and on the faq[1] it says: > Note that in the case that you withdraw the CD before 10 years, the penalty would reduce the principal value of the CD. Does that mean if they close within 10 years, the FDIC insurance would be below the principal? [1] https://www.waldenmutual.com/posts/coming-soon-our-100-year-grow-local-cd-sustainable-banking https://www.waldenmutual.com/posts/coming-soon-our-100-year-...
- lmm 3y ago> Does that mean if they close within 10 years, the FDIC insurance would be below the principal? No? The FDIC insures the money in your account, not the money in your account minus some random estimate of your fees.
- deleted 3y ago[deleted]
- IAmGraydon 3y agoThey’re offering a 100 year CD because they’re betting that the fed rate will remain higher than their current level for…well basically forever (or longer than any of us will live). I think it’s actually a pretty safe bet. If they’re right, this is a terrible way to save your money.
- oceanofsolaris 3y agoAnd if they are wrong (and this sells well) … they might just go bancrupt, leaving you with only a small part of the upside.
- sacnoradhq 3y agoI have exactly 0% confidence banks or the United States will exist in 100 years. And I'm thinking there will be 3-7 territories run by trillionaire and/or religious feudal dictators.
- Loic 3y agoCD: Certificate of Deposit.
- mnd999 3y agoThanks, for some reason I though credit derivative.
- can16358p 3y agoI thought Compact Disc, yours is still more relevant.
- Tade0 3y agoSame here. Most of mine didn't survive 10 years before becoming unreadable. A Blu-ray disc that's guaranteed to last 100 years would really be something. Of course by that time there would be problems with finding a device that could read such a storage medium, but I assume a custom one could be made easily with the technology of the 22nd century.
- aidenn0 3y agoHuh, almost all of my CDs work great. Are you talking about pressed CDs or CD-Rs? The latter definitely have a much shorter shelf-life than the former.
- Tade0 3y agoMostly CD-Rs, but I have a few pressed CDs which don't read at all any more, despite looking fine on the outside.
- fragmede 3y agoBuy a 100 of them and keep them with the discs. Also keep adding adapters so you can connect your then present-day laptop with USB-40 all the way down to the USB-3 connector that we're using today.
- drewrbaker 3y agoI assumed the point of this product was to buy it in a tax deferred account, then loan against it. You’d have zero risk of a margin call ever happening. Then after you’re dead it’s a guaranteed payoff of the loan. Would be a very very cheap way to convert your tax deferred accounts into tax free liquid cash now.
- somebodythere 3y agoLoans against a retirement account are treated as distributions under the tax code.
- drewrbaker 3y agoYou are correct. I did not know that. Explained here: https://finance.zacks.com/can-retirement-accounts-used-collateral-10466.html https://finance.zacks.com/can-retirement-accounts-used-colla...
- actionfromafar 3y agoIs it a pressed or burned disc? Pressed discs should already survive 100 years if stored carefully.