Author Topic: Union based crazy savings account  (Read 3063 times)

pichirino

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Union based crazy savings account
« on: August 10, 2014, 12:32:02 PM »
This would surely be peculiar in the MMM investment world.

My union has a savings account which due to leveraging profits for its members
pays an interest of 8-10% per year.(in the caribean not US)
Over a period of 20 years it has not been lower then 7% according to the company that manages it.

My question would be,what would be the appriopiate withdrawal rate for such an account?
Currently I just consider leaving 3% yearly for inflation and adjust my withdrawal rate based on that.

In my circumstance would this be wise?


Gin1984

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Re: Union based crazy savings account
« Reply #1 on: August 10, 2014, 12:47:14 PM »
I'd say leave 4% in, but I'd like to know more about the account and what amount of risk you are agreeing to.

pichirino

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Re: Union based crazy savings account
« Reply #2 on: August 10, 2014, 01:32:34 PM »
Well there are no fees to this account since its tied to my job(will keep if I leave)
The central bank of where I live oversees the accounts to ensure that it doesn't go in the wrong direction.

What I save is automatically deducted monthly from my salary so I don't even see it.
If I leave my current job I will stay in this savings union so I could possibly use it to pay dividents afterwards.

Dodge

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Re: Union based crazy savings account
« Reply #3 on: August 10, 2014, 02:04:42 PM »
What has the inflation rate been in your country over the last 20 years?

viper155

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Re: Union based crazy savings account
« Reply #4 on: August 10, 2014, 02:49:01 PM »
I'm guessing Cayman Islands?

Gin1984

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Re: Union based crazy savings account
« Reply #5 on: August 10, 2014, 03:01:39 PM »
I'm guessing Cayman Islands?
I know unions in the USA that do something similar but it is pre-tax money from the employer that the union gets and controls, and of course distributes aka a pension. 

pichirino

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Re: Union based crazy savings account
« Reply #6 on: August 10, 2014, 08:09:43 PM »
Not cayman islands but one of the islands from the song of the beach boys.
Have not checked the inflation rate over such a long period,only a few years to get an idea, would that be the deciding factor for a future withdrawal rate?

The credit union gets its money by giving out loans to its members(who want it)and also from the savings which at least a part of is deposited into CD's supposedly of which somehow the interest put to the savings accounts are given.

« Last Edit: August 10, 2014, 08:11:14 PM by pichirino »

Dodge

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Re: Union based crazy savings account
« Reply #7 on: August 10, 2014, 09:22:53 PM »
Not cayman islands but one of the islands from the song of the beach boys.
Have not checked the inflation rate over such a long period,only a few years to get an idea, would that be the deciding factor for a future withdrawal rate?

The credit union gets its money by giving out loans to its members(who want it)and also from the savings which at least a part of is deposited into CD's supposedly of which somehow the interest put to the savings accounts are given.

Yes, inflation definitely matters.  Hearing that the yield has never gone below 7% over the last 20 years, makes me think your inflation rate might be very high.  Inflation is worse than a bad market. The market loss during the great depression was nothing compared to the inflation of the 1970's (USA).

For example, if the long term yield is expected to be 7%, but inflation is 6%, your "safe withdrawal rate" can't be any more than 1%.  Otherwise you'd be losing purchasing power every year.

pichirino

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Re: Union based crazy savings account
« Reply #8 on: August 10, 2014, 09:38:40 PM »
I understand what you mean,I will check into the data and see the inflation of this island over the last 20 years if possible.
Though are your thoughts in regards to the yield have to do with what you believe about stockmarkets?
I ask because it seems to me that the credit union savings account has a different modus operandi.

Just checking.

Dodge

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Re: Union based crazy savings account
« Reply #9 on: August 10, 2014, 09:54:01 PM »
I understand what you mean,I will check into the data and see the inflation of this island over the last 20 years if possible.
Though are your thoughts in regards to the yield have to do with what you believe about stockmarkets?
I ask because it seems to me that the credit union savings account has a different modus operandi.

Just checking.

If it's anything like the credit unions/banks in the USA, it's backed by the government, so even if they go out of business, you don't lose your money.  This would make it a safe investment.  Safe investments, however, always mean lower returns.  That makes me think your inflation rate might be high.