Short term investing of life insurance? CDs?

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MN-Investor
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Short term investing of life insurance? CDs?

Post by MN-Investor »

My sister has just received $230K life insurance payout from the death of her spouse. I think she'll be using that over the next four years until RMDs from her IRAs begin. So I'm thinking that $230K should maybe be invested in some sort of CDs over the next two years? The 10-month CD her credit union is promoting has a 4.65% rate. So I looked to see what Fidelity - where I have my IRA - has for CDs and there's a whole list of 5+% CDs from all sorts of banks available. I'm overwhelmed. How does one even approach this? If there's advice at the Wiki or in a previous post, just point me there. Or give me some basic advice on where to start.

(By the way, I am a long time investor myself, but that's in low expense ratio broad based index funds, not CDs.)
The key to success - Save early, save often, invest well.
bradinsky
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Re: Short term investing of life insurance? CDs?

Post by bradinsky »

Why not consider a money market fund from Fidelity? Its dividend is approaching 5%.
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Stinky
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Re: Short term investing of life insurance? CDs?

Post by Stinky »

Vanguard Federal Money Market Fund (VMFXX) has a current 7-day yield of 5.04%.

That fund, and other money market funds, would give her total liquidity on the proceeds. Funds in VMFXX can be transferred to her bank account and available to her on the next business day.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
billfromct
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Re: Short term investing of life insurance? CDs?

Post by billfromct »

The Vanguard Treasury MM Fund interest rate has gone up from about .10% (March 2022) to 5.03% today & could move back down to a .10% interest rate over the next 15 months, no one knows.

Maybe the best thing to do would be to build a CD ladder with 3 or 6 month maturity intervals (3 month CD, 6 month CD, 9 month CD, 1 year CD, etc) to lock in 5% interest rates over the next 4 years until RMDs kick in. Maybe set 6 month or 1 year CDs after the first year to make things simple. I think brokerage CDs may give better rates but make sure they aren’t “callable” before the maturity date.

I haven’t bought brokerage CDs so I don’t know the administrative work to do this.

bill
gotoparks
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Re: Short term investing of life insurance? CDs?

Post by gotoparks »

If you are looking at brokered CDs don't look at the callable ones. I see lots of quotes about CDs over 5% but they are callable. A money market fund is fine if she has a brokerage account. The easiest thing to do is just open a cd at her credit union if she doesn't have a brokerage and doesn't want another account. There are lots of threads about CDs if you do a search.
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MN-Investor
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Re: Short term investing of life insurance? CDs?

Post by MN-Investor »

Thanks for the info. I discussed it with my sister and, since there's a Fidelity office near her, she's going to put the money into a money market account there. That will allow her the greatest flexibility while she's figuring out her finances as a widow.
The key to success - Save early, save often, invest well.
bradinsky
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Re: Short term investing of life insurance? CDs?

Post by bradinsky »

That’s a good & safe choice.
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Stinky
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Re: Short term investing of life insurance? CDs?

Post by Stinky »

MN-Investor wrote: Mon May 29, 2023 7:49 pm Thanks for the info. I discussed it with my sister and, since there's a Fidelity office near her, she's going to put the money into a money market account there. That will allow her the greatest flexibility while she's figuring out her finances as a widow.
Sounds like a great answer for her.

Best to you.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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