Would you put money into CD or pay off car note

[jmlrn]

Currently have $8600 from a CD that matured. Have a car note with $8600 payoff. Loan was for 3.25%. Currently have two more full years to pay off. Should I pay it off?  Also thinking I could put the $8600 into a CD for 1 year at 2.75% then see what the market does at that time. Already did a $10,000 I bond this year & contributed $7000 to my ROTH. Age 62 hoping to work 5 more years. What would you do? I will add not doing well in retirement picture. Have Vanguard PAS, currently 46% prediction I will have enough money for my needs in retirement.

[Tiny]

With 2 years left on the loan - I'm guesstimating you will pay $300 in interest. 
How long will it take you to rebuild the $8600 in "cash" that you currently have?   


I'm probably not the best person to give advice.  My "math skills" are a little sketchy.  

If it was me - I would NOT pay off the car loan. 3.25% isn't that high an interest rate in view of today's rising interest rates.   Your car is a depreciating asset and an ongoing expense (even after it's paid off).   You can't easily get access to the money you paid towards the loan and someday your car will be "worthless".      That's not a bad thing.  It's just a thing.      

You don't mention an Emergency Fund.   

The Fed just raised it's rate .75  that may effect CD rates (and Treasury T-Bills and T-Notes) in the coming weeks. 

I would hold the money/cash  - and keep it "working for me" -  either in a CD (or a T-Bill/T-Note  or maybe an IBond come January 1st if you can tolerate the 12 month lock -  the guestimate is that he November rate will be 6% or so... no idea of what the May 2023 rate will be.)

I am using a 13 week T-Bill (mature in January) to hold some of the money I  will use to buy I-Bonds in 2023.   I'm timing for January just because it seems like a nice thing to do.   Your timing could vary.  

If not planning to do a I-Bond in 2023 and if the $8600 is considered short term $$ - I might be inclined to "ladder" the $8600 cash to take advantage of the rising rates - either in CDs or T-Bills/T-notes at treasury direct.    <---  That rising rates is all speculation on my part.      

[giramomma]

I would stick the 8600 in the market now, in something with medium growth.

I also would not pay off your car loan.

[Tiny]

I just checked Treasury Direct and it looks like the short term t-bills are getting 3% or more...   I may not be reading it correctly. 


Another thing to consider is how stable the OP's job is...   there's bound to be some turbulence in the job market going forward - and it's possible that some areas/employers will be effected (which may mean some job losses).      It's always a crap shoot - but as always (in good or bad times) it's good to consider and to keep your ears/eyes open at work.   

 

[minnesotapaintlady]

Do you have a work sponsored retirement plan that you're not maxing?  HSA?  If so, I'd pay it off and use what you were sending towards payments to up that. 

[Artemis Windsong]

I'm all for keeping the cash.  If you don't have an  I-bond now at $10,000, you can buy an I-bond the in December and get the year's interest.  One of the posters did that.  You'd have to check back through the I-bond thread.  This would need to be money you don't need for a couple of years.

I'll check to see if I can find the poster name.  Rukh O'Rorke.  I messaged to get confirmation on buying late in December to get the year's interest.

[minnesotapaintlady]

Sept 22, 2022 12:39:33 GMT -5 Artemis Windsong said:

I'm all for keeping the cash.  If you don't have an  I-bond now at $10,000, you can buy an I-bond the in December and get the year's interest.  One of the posters did that.  You'd have to check back through the I-bond thread.  This would need to be money you don't need for a couple of years.

I'll check to see if I can find the poster name.  Rukh O'Rorke.  I messaged to get confirmation on buying late in December to get the year's interest.

She already bought her 10K I bond this year.  She can't buy again until January.

[countrygirl2]

The I bonds are drawing 9.62% till the first of November, not sure what the new rate will be.

On the federal return you can get a $5000 refund in a paper I bond, or if married $10k in a bond. 

We are thinking of overpaying our federal taxes so we can do that.

CD's are sure paying low amounts and I don't know what my MM is doing, had been nothing. There is $60k stashed in there and we have more money in IRA's that need to be working for us. Son just put $100k in and ETF bond fund, not sure exactly what it is.

But this 3/4% rate raise may spell death to our planned house sale, darn. But hubs can only work so fast. It will rent well, but I hate to fix it nice and not be able to sell it. We will still try.

I am anxious to see what my I bonds will pay they are exceeding expectations so far.

If you can do without the money for a year or two, I would invest it in something like this. If you cannot then a lower paying investment. Have to figure which is more advantageous.

[minnesotapaintlady]

Sept 22, 2022 14:16:20 GMT -5 countrygirl2 said:

On the federal return you can get a $5000 refund in a paper I bond, or if married $10k in a bond. 

I mentioned this to you this morning, but you must have missed it.  You can only get 5K through tax refund even if married.

[countrygirl2]

Really?

[minnesotapaintlady]

Yes, it's per tax return, not per SS number.  So unless you file MFS...

[countrygirl2]

Ok, that is if you are married and filing separately, as usual should have paid more attention. 

[swamp]

I'd pay the car off.  

[jerseygirl]

I’d pay off the car. Really hate needing to pay bills every month . If I could pay electric fully at beginning of year I’d do that.

[jmlrn]

Not familiar with T-bills or T-notes and don't know anyone who has them. Read about them briefly just now. Sounds like you could possibly come away with nothing gained. Not sure.

I'm leaning now towards not paying off the loan. Would actually like to do another $10,000 I-bond in Jan. I am very new to I bonds also. In the past how low of an interest rate did they pay? Have they paid less than 2% that you remember? I know the rate of 9.62% is unusually high.

[minnesotapaintlady]

Sept 22, 2022 21:13:03 GMT -5 jmlrn said:

Not familiar with T-bills or T-notes and don't know anyone who has them. Read about them briefly just now. Sounds like you could possibly come away with nothing gained. Not sure.

I'm leaning now towards not paying off the loan. Would actually like to do another $10,000 I-bond in Jan. I am very new to I bonds also. In the past how low of an interest rate did they pay? Have they paid less than 2% that you remember? I know the rate of 9.62% is unusually high.

They were normally between 2-3%.  This is the composite (inflation + fixed) going back to 98.


www.treasurydirect.gov/indiv/research/indepth/ibonds/IBondRateChart.pdf

[Happy prose]

I would pay off the car because I hate bills. Plus the car won't be worth as much in two years.

[MN-Investor]

I'm one of those, too, who would pay off the debt.

We bought our house in 1980 and finished paying off the mortgage in 1994. When we were debating me leaving the workforce in 1999, the fact that we no longer had any monthly debts was a factor in our decision.

And, as Happy Prose noted, a car is a depreciating asset. I know it goes against Phil's advice, but my husband and I were strong believers in saving up and paying cash for vehicles. We only borrowed for our very first car.

[muffyinthered]

MuffyintheRed - I just found this thread and need to ask a question.  We have an IRA that is losing money.  We haven't even made enough to offset the fee we have to pay.  I was thinking about just having it all put into a Money Market account at Fidelity without the handlers moving the money around.  I won't make up what I have lost but at least I won't lose anymore.

Does anyone know if you can buy and I bond in an IRA?

[minnesotapaintlady]

Sept 26, 2022 12:00:21 GMT -5 muffyinthered said:

Does anyone know if you can buy and I bond in an IRA?

No, you cannot. They can only be purchased through Treasury Direct.

[muffyinthered]

Thank you for answering.

[bean29]

Sept 26, 2022 12:00:21 GMT -5 muffyinthered said:

MuffyintheRed - I just found this thread and need to ask a question.  We have an IRA that is losing money.  We haven't even made enough to offset the fee we have to pay.  I was thinking about just having it all put into a Money Market account at Fidelity without the handlers moving the money around.  I won't make up what I have lost but at least I won't lose anymore.

Does anyone know if you can buy and I bond in an IRA?

The question is, What is your IRA invested in?  I looked at my work 401K yesterday and I am down significantly from the beginning of the year, despite the fact that I am on track to Max my 401K investment for the year. You might want to change the investment, or, depending on when you might need to use the funds, just leave it where it is.  Most people are using the Dollar Cost Average Method and figure they keep investing and the market will recover sooner rather than later- although it may be a year out before things improve.