40 years ago, on September 30th, 1981, there was a shift in the bond market. If you were to buy bonds during this time you would have had a very high interest rate. A 20-year treasury bond had a rate of 15.78%. Compare that to today’s rate of 1.99%. Obviously, a lot of things have changed since the 80s, including interest rates, inflation rates, and taxes. On today’s episode, Don is going to discuss these changes as well as some proposed changes working their way through Congress.
A lot of people worry about making the right decisions when investing, even in the 1980s. In the 80s when interest rates for 20-year bonds were so high, many of us were looking for 6-month short-term bonds instead. Hindsight is 20-20. Today, people clamor for bonds at much lower rates.
Bond values are generally strong but when rates move in unexpected directions, as they did in 1981, you can really lose out. The bond market is a huge part of our overall economy, it’s even bigger than the stock market. So, make sure you are diversifying and speaking with your advisor about what is best for you.
Unfortunately, there are only two ways to fund the government, by taking on debt or increasing taxes. In 1981 the national debt was 1 trillion dollars. Today it is 30 trillion. You probably have heard of some proposals making their way through Congress at the moment. Remember as they are right now, they are just proposals. But they do show a trend of where Congress is headed when it comes to taxes so we should plan accordingly. Although a lot of these plans are aspirational, it is still important you discuss their repercussions on your financial plan with your advisor.
Listen to the full episode to learn more or skip around to certain topics.
[0:36] – Happy October!
[4:07] – 1981 Article
[6:18] – Bond rates in 1981
[7:34] – Bonds & CDs
[10:01] – Investing hindsight
[13:00] – What can cause an increase in interest rates?
[15:47] – Proposed tax changes
[18:56] – Not than many billionaires
Phone: (732) 784-2867
Donald W. Cash – CPA, CFP® is an independent advisor. Don began his career in 1985 as an accountant after graduating Rutgers University. In 1990 he entered the field of Estate Planning with a concentration in long term care planning. Don has been advising clients in the baby boomer and retirement market for 20 years. He has helped over 1,000 families with their planning needs. He advocates a holistic approach to Estate and Financial Planning as has relationships with other professionals including Attorneys, CPA’s, Mortgage Specialists, Insurance Specialists and Asset Managers. Don is married to Cathy and have 4 children, Carly, DJ, Nick and Tori. They live in Freehold, NJ.