Mountain America Credit Union 5-Year IRA CD

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Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Sun May 12, 2013 2:14 pm

I just published a blog post on my experience with opening an account at Mountain America Credit Union, and transferring money from other IRA accounts into a new IRA account at MACU to purchase one of their 5-year CDs: Kevin On Investing: Mountain America Credit Union 5-Year CD. I like to share things like this so people will know exactly what's involved, and perhaps be encouraged to include CDs in the fixed-income portion of their portfolios.

Key points for those who don't want to click through to the (non-commercial) blog:

  • Mountain America Credit Union is easy and free for anyone to join.
  • IRA accounts available.
  • Entire process was completed online, including e-signatures, and with one phone call from a rep, including the IRA transfers; no paper documents involved at all!
  • The 5-year CD earns 2.0% APY with an early withdrawal penalty (EWP) of 180 days of interest; this is excellent in the current environment.
  • I liquidated my entire holding of Vanguard Short-Term Investment-Grade bond fund to partially fund the new CD, since the yield no longer justifies the risk compared to the CD.
  • I liquidated half of my holding of Vanguard Intermediate-Term Investment Grade bond fund to partially fund the new CD.
  • Federally insured, non-brokered CDs provide a superior risk/return profile compared to Treasuries; applicable to those who have portfolio assets outside of 401K/403B plans (e.g., IRAs, taxable accounts).
  • With this latest move, my fixed income is now about 2/3 CDs (federally insured, non-brokered), 1/3 bond funds (mostly intermediate-term investment-grade and tax-exempt).
Hope some find this useful.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby Blues » Sun May 12, 2013 2:25 pm

Good info, Kevin, thanks for sharing.

So, are you using your remaining bond funds to rebalance, rebalancing with new money or some other method?
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Sun May 12, 2013 9:01 pm

Blues wrote:Good info, Kevin, thanks for sharing.

So, are you using your remaining bond funds to rebalance, rebalancing with new money or some other method?

Thanks Blues.

Lately rebalancing has been from stocks to fixed income, so it hasn't been an issue. When I added to equities during the last couple of equity corrections, I probably had built up some cash from selling bond funds. When we have the next big correction in equities, I probably will first use funds in money markets in IRAs (definitely for REIT), then I would use cash in online savings (earning about 1%), and then tax-exempt bond funds in taxable accounts.

I also have some 5% brokered CDs maturing this year in IRA accounts, so unless I find more good CD deals, this is likely to sit in money markets earning nothing for awhile. At today's low rates, I'm perfectly happy adding to equities in tax-advantaged accounts if the situation warrants it. I also have recently sold a bit more of my muni funds, so have a bit more cash than I want. This would be used for rebalancing if it doesn't go into CDs first.

I don't really have "new money", since I'm retired.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby Blues » Sun May 12, 2013 9:24 pm

Kevin M wrote:I don't really have "new money", since I'm retired.

Kevin


You make that sound like a bad thing. :wink:

Thanks for the info, from one retired friend to another. :sharebeer
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Sun May 12, 2013 9:35 pm

Blues wrote:
Kevin M wrote:I don't really have "new money", since I'm retired.

Kevin


You make that sound like a bad thing. :wink:

Funny, I certainly didn't mean it that way. :o

Blues wrote:Thanks for the info, from one retired friend to another. :sharebeer

Right on. Some people just don't understand how busy being retired can be. :sharebeer
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Re: Mountain America Credit Union 5-Year IRA CD

Postby xram » Mon May 13, 2013 12:23 am

Thank you for the info.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Boonedog » Mon May 13, 2013 6:41 pm

Ally Bank has a 5 year CD paying 1.54% with 2 month interest penalty for early withdrawal versus Mountain Credit's 6 month penalty, maybe the difference in interest rate at Ally and the early withdrawal rate at Mountain is a wash and Ally would be the better vehicle, just a thought.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Mon May 13, 2013 6:52 pm

Boonedog wrote:Ally Bank has a 5 year CD paying 1.54% with 2 month interest penalty for early withdrawal versus Mountain Credit's 6 month penalty, maybe the difference in interest rate at Ally and the early withdrawal rate at Mountain is a wash and Ally would be the better vehicle, just a thought.

The Ally rate is now 1.51%, but it bounces around from week to week. The Ally CD is better if you expect to do an early withdrawal up until about 2 years (a little less), at which point the MACU CD becomes a better deal.

I have lots of Ally CDs already, both in taxable and IRA accounts, but I'm using the higher rate CDs with somewhat larger EWPs to hedge against continued low rates for several more years.

For those with more than $250K in IRA accounts that they want to have in CDs, you need multiple choices. MACU,Barclays (edit: I forgot that Barclays does not offer IRA accounts, so only good for taxable), and Ally are all reasonable choices for 5-year CDs, and there are others as well. PenFed CD rates now suck, although they were competitive in the past (and I loaded up on them in an IRA account when they were).

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Re: Mountain America Credit Union 5-Year IRA CD

Postby tfb » Mon May 13, 2013 7:19 pm

Boonedog wrote:Ally Bank has a 5 year CD paying 1.54% with 2 month interest penalty for early withdrawal versus Mountain Credit's 6 month penalty, maybe the difference in interest rate at Ally and the early withdrawal rate at Mountain is a wash and Ally would be the better vehicle, just a thought.

It's not. Every year you don't withdraw, you lose 0.5%. When you do withdraw, you save 0.75%. Therefore you need a 66% probability to withdraw within the first year, and 100% certainty to withdraw within the first two years to come out ahead with a lower-yield-lower-penalty CD. That low penalty option is quite costly.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby xram » Mon May 13, 2013 7:50 pm

So I have total bond market in a Roth IRA at Vanguard.

I could "transfer" that Roth IRA to Mountain in order to take advantage of the CD being discussed?

Thanks
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Re: Mountain America Credit Union 5-Year IRA CD

Postby gerrym51 » Mon May 13, 2013 8:20 pm

if your positive you will break the cd early go with ally. if not i can see going to somewhere else.this fixation i see on this board is just about everyone thinks rate will go up in the near term. i don't think so
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Mon May 13, 2013 8:42 pm

xram wrote:So I have total bond market in a Roth IRA at Vanguard.

I could "transfer" that Roth IRA to Mountain in order to take advantage of the CD being discussed?

Thanks
Xram

Yes. You can do a partial or complete transfer of your Vanguard IRA (Roth or Traditional) to another custodian, such as MACU, to put into CDs. I detailed the steps of my partial transfer from Vanguard to MACU in my blog post. As long as the new custodian provides both types of IRAs, it doesn't matter whether it's a tIRA or Roth.

I would keep some fixed income in a bond fund or other more liquid form for rebalancing purposes, although I personally wouldn't use TBM. The CDs serve as a (superior) replacement for the treasuries in TBM, so you could use an investment-grade bond fund to replace the non-treasury portion of TBM; i.e., you could create something similar to TBM, split between CDs and investment-grade bond funds.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Mon May 13, 2013 8:49 pm

gerrym51 wrote:if your positive you will break the cd early go with ally. if not i can see going to somewhere else.this fixation i see on this board is just about everyone thinks rate will go up in the near term. i don't think so

Only if you're likely to break the CD in less than two years. The MACU CD comes out ahead if you break it in about two years or more.

No one knows what rates will be next year or in five years. If I knew intermediate-term rates would increase significantly in the next five years, I wouldn't keep anything in intermediate-term bond funds. If I knew intermediate-term rates would stay low for the next five years, I'd keep everything in intermediate-term bond funds. Since I don't know, I hedge my bets by keeping 2/3 in super-safe CDs with a lower yield, and 1/3 in intermediate-term investment grade and tax-exempt bond funds with higher yields and more interest-rate risk. If rates fall further, I'll probably move more from bond funds to CDs, as the lower rates go, the higher the interest-rate risk, and the lower the potential rewards for taking the risk.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby Allan Roth » Tue May 14, 2013 5:23 pm

I'm checking them out now and all appears good. To qualify for membership, one only has to have bought an appliance sometime during their lifetime.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Tue May 14, 2013 7:35 pm

Allan Roth wrote:I'm checking them out now and all appears good. To qualify for membership, one only has to have bought an appliance sometime during their lifetime.

My transfers from other IRAs have been completed, and I can see, online, my money sitting happily in the 5-year CD. There were a couple of minor snafus I noticed in the account setup online, but they were easily handled with a couple of phone calls, and may have been handled even if I didn't call. I was checking daily to see what was going on.

As I mentioned in my blog post, I just selected "I don't know" as the membership qualification criterion. In the follow-up phone call, I was not asked a single question that seemed to be a membership qualification question. I'm pretty sure my geographical location in California does not qualify me. According to Ken at DepositAccounts:

Credit union membership is open to members of the American Consumer Council. According to the ACC website "Join for free - if your intention is to join one of our participating credit unions, or if you are already a member of a credit union, you can join for free!"

I didn't do that, but maybe the credit union signed me up without me knowing about it :wink:

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Re: Mountain America Credit Union 5-Year IRA CD

Postby learning_head » Fri May 17, 2013 4:33 pm

After considering this for a while and cringing and all, I finally decided to go with 2% 5yr NON-IRA (i.e. regular) CDs at Mountain America Credit Union (instead of an ~A-rated 6yr duration muni bond fund with ~1% extra sec yield after-tax)... The process of setting this up was simple:

Day 1: filled out application (I also put in Not Sure for why I am qualified)
Day 2: got a call from MACU CSR who finished the process with me over phone and over emailed documents; scheduled wire transfer for funds into MACU (MACU reimbursed me for $10 incoming wire fee)
Day 3: wire arrived; the same CSR setup my CDs (I opened a few in case I want to close our some earlier), and sent me POD forms to fill out - all via email again.

All done, overall process took a few (2-3?) hours I would guess. CSR that called me worked with me all the way through, was VERY pleasing to work with. She also gave me direct number in case I have any questions. So far, great experience!

One more nice thing: there is no dormancy / inactivity fees when you have CDs (unlike other places that require some txn once a year or so). Savings acct has to have $25. I did not open checking acct.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby xram » Fri May 17, 2013 7:25 pm

Eligibility Requirements for Mountain America credit unIon

https://www.macu.com/aboutus/join/eligibility/



ELIGIBILITY

To be eligible for Mountain America Credit Union membership, you must be one of the following:

Resident of:
Salt Lake County (UT)
Duchesne County (UT)
Wasatch County (UT) census tract 940300
Uintah County (UT) census tract 940100 or 940200
Find your census tract number.

OR

Family member of existing Mountain America member, including:
Parent
Child
Spouse (including surviving spouse)
Sibling
Grandparent
Grandchild
Stepparent
Stepchild
Stepsibling
Adoptive relationship

OR

Living with or under the same roof as existing Mountain America members

OR

Employee or volunteer of a select employee group (SEG) or affiliated association (click below)
https://www.macu.com/aboutus/join/segs/

To become a select employer group or affiliated association, visit your nearest branch or call us toll-free at 1-800-748-4302.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby xram » Fri May 17, 2013 7:28 pm

If using "not sure" seems to work fairly well when joining credit unions, has anybody tried this at

Southern gas credit union
http://www.depositaccounts.com/cd/3-year-cd-rates.html

They have 3year cd at 2.35%
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Fri May 17, 2013 7:55 pm

xram wrote:If using "not sure" seems to work fairly well when joining credit unions, has anybody tried this at

Southern gas credit union
http://www.depositaccounts.com/cd/3-year-cd-rates.html

They have 3year cd at 2.35%

It doesn't necessarily work at all or even most credit unions. I joined another credit union that I didn't obviously qualify for, and they definitely asked how I was qualifying (twice, by two different reps, even after the first rep had approved my membership). They don't necessarily check on what you tell them. For example, if you were to attend a meditation retreat in one of their geographically qualifying areas, you could indicate that you worship in the area, even if you don't live anywhere close by :wink:

I'll probably be looking for another IRA CD in the near future (brokered 5% CDs maturing :( ), so may check this one out if they offer IRA CDs.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby learning_head » Sat May 18, 2013 10:39 am

xram wrote:Eligibility Requirements for Mountain America credit unIon

[...]

Employee or volunteer of a select employee group (SEG) or affiliated association (click below)
https://www.macu.com/aboutus/join/segs/



One of the associations on the list is "American Consumer Council" which allows one to join for free if its membership is used to join a member credit union. Perhaps they just decided to skip that part and qualify one anyway. In any case, I think qualifying like this might be an exception, not a rule. (Thank you Kevin for the tip!)

xram, if you do join the credit union you mentioned in some way, please let us know as well! :-)
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Sat May 18, 2013 11:42 am

Another credit union I joined in the past told me not to worry about it--they would figure out how to qualify me, and they did. Based on the membership criteria I see for Southern Gas CU, I doubt this will work there:

We proudly serve employees of the following groups (immediate family members such as spouse, child, step-child, sibling, parent, grandparent, or grandchild are also eligible to join):

CenterPoint Energy
R.D. Crumley
Holder Pipeline
Parnell Consultants Inc.


This seems quite limited, so I'm guessing there are no loopholes. Also, based on what I see on their website, you have to fill out an application on paper, and enter your qualification criterion on the application. If anyone takes the time to call and ask them, please let us know if there are any other ways to qualify for membership.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby gerrym51 » Sat May 18, 2013 3:22 pm

hey kevin is there a minimum on this cd.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby rec7 » Sat May 18, 2013 5:14 pm

Be careful on Southern Gas FCU those rate are from 09
Annual Percentage Yield is accurate as of April 16, 2009. Rates and other terms may change at any time without prior notice. *$1000.00 minimum required to open a Share Certificate account. After your certificate is opened, the dividend rate is fixed for the term. A penalty is imposed for early withdrawal. Fees could reduce earnings on the account.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby john94549 » Sat May 18, 2013 7:58 pm

Not much to brag about in our FI these days. At best, it's a holding area for equity gains. At worst, it's (gasp) a stand-alone investment (not a good idea, might I say).

That said, Kevin has noted all the pluses and minuses. Anyone contemplating CDs as a part of their FI should peruse Kevin's posts.

I'm but a wanderer with a CD ladder.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby FrugalInvestor » Sat May 18, 2013 8:31 pm

Allan Roth wrote:To qualify for membership, one only has to have bought an appliance sometime during their lifetime.


:wink:
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Re: Mountain America Credit Union 5-Year IRA CD

Postby boater07 » Tue May 21, 2013 10:24 pm

Anyone trying to get a new account with them? My experience is horrible and I'm starting to be concerned before sending funds to them.
They asked me to request Vanguard to transfer funds based on my verbal request. Vanguard declines without actual signature from me on transfer form.
This whole electronic system the credit union is using seems backward. The telephone reps are not much help and the emails they promise-
don't show up. I just don't get a feeling of competence with this process. We Bogleheads have perhaps overwhelmed them with new business
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Re: Mountain America Credit Union 5-Year IRA CD

Postby gerrym51 » Tue May 21, 2013 10:34 pm

boater07 wrote:Anyone trying to get a new account with them? My experience is horrible and I'm starting to be concerned before sending funds to them.
They asked me to request Vanguard to transfer funds based on my verbal request. Vanguard declines without actual signature from me on transfer form.
This whole electronic system the credit union is using seems backward. The telephone reps are not much help and the emails they promise-
don't show up. I just don't get a feeling of competence with this process. We Bogleheads have perhaps overwhelmed them with new business



why don't you look at vanguard brokered cd's. but make sure you know all the in's and outs of brokered cd's. a brokered cd operates like a bond with guaranteed principal and interest. every thing else acts like a bond
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Tue May 21, 2013 10:38 pm

gerrym51 wrote:hey kevin is there a minimum on this cd.

$500. Thought I answered this already, but don't see it.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Tue May 21, 2013 10:41 pm

gerrym51 wrote:why don't you look at vanguard brokered cd's. but make sure you know all the in's and outs of brokered cd's. a brokered cd operates like a bond with guaranteed principal and interest. every thing else acts like a bond

You won't find any brokered CDs with anywhere near the attractive terms of non-brokered CDs. I doubt you'll find comparable yields, and as you say, you have the same interest rate risk as with a bond, so you lose one of the huge advantages of a non-brokered CD with reasonable early withdrawal terms. I don't even bother looking at brokered CDs these days, although I have in the past.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby boater07 » Tue May 21, 2013 10:46 pm

gerrym51 wrote:
boater07 wrote:Anyone trying to get a new account with them? My experience is horrible and I'm starting to be concerned before sending funds to them.
They asked me to request Vanguard to transfer funds based on my verbal request. Vanguard declines without actual signature from me on transfer form.
This whole electronic system the credit union is using seems backward. The telephone reps are not much help and the emails they promise-
don't show up. I just don't get a feeling of competence with this process. We Bogleheads have perhaps overwhelmed them with new business



why don't you look at vanguard brokered cd's. but make sure you know all the in's and outs of brokered cd's. a brokered cd operates like a bond with guaranteed principal and interest. every thing else acts like a bond




Yes- I'm aware of the differences. Nothing close to 2%.
My experience with Penfed and Ally has been much smoother but need another institution for the insurance
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Re: Mountain America Credit Union 5-Year IRA CD

Postby gerrym51 » Tue May 21, 2013 10:52 pm

boater07 wrote:
gerrym51 wrote:
boater07 wrote:Anyone trying to get a new account with them? My experience is horrible and I'm starting to be concerned before sending funds to them.
They asked me to request Vanguard to transfer funds based on my verbal request. Vanguard declines without actual signature from me on transfer form.
This whole electronic system the credit union is using seems backward. The telephone reps are not much help and the emails they promise-
don't show up. I just don't get a feeling of competence with this process. We Bogleheads have perhaps overwhelmed them with new business



why don't you look at vanguard brokered cd's. but make sure you know all the in's and outs of brokered cd's. a brokered cd operates like a bond with guaranteed principal and interest. every thing else acts like a bond




Yes- I'm aware of the differences. Nothing close to 2%.
My experience with Penfed and Ally has been much smoother but need another institution for the insurance



look at fidelity both new issue and secondary market
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Re: Mountain America Credit Union 5-Year IRA CD

Postby boater07 » Tue May 21, 2013 11:18 pm

Thanks. I don't want to go out more than 5 years and brokered don't even come close 1.5%.
I like Kevin's original points and have also been trying to reduce my short/interm funds. As a matter of fact-already in MM.
I hope I don't get banned on the forum for my market timing 8-) . I'm always reminded by Larry S comments not to take more risk than necessary.
I'm fortunate to be able to get by on2-3% withdrawal rate.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby xram » Wed May 22, 2013 6:43 am

Kevin M wrote:
xram wrote:So I have total bond market in a Roth IRA at Vanguard.

I could "transfer" that Roth IRA to Mountain in order to take advantage of the CD being discussed?

Thanks
Xram

Yes. You can do a partial or complete transfer of your Vanguard IRA (Roth or Traditional) to another custodian, such as MACU, to put into CDs. I detailed the steps of my partial transfer from Vanguard to MACU in my blog post. As long as the new custodian provides both types of IRAs, it doesn't matter whether it's a tIRA or Roth.

I would keep some fixed income in a bond fund or other more liquid form for rebalancing purposes, although I personally wouldn't use TBM. The CDs serve as a (superior) replacement for the treasuries in TBM, so you could use an investment-grade bond fund to replace the non-treasury portion of TBM; i.e., you could create something similar to TBM, split between CDs and investment-grade bond funds.

Kevin

Thank you.

VBTLX - TBM
SEC YIELD of 1.56%
DISTRIBUTION YIELD of 2.36%

I don't really understand what distribution yield is. Sorry.

think it makes sense to switch some of my TBM to MOUNTAIN CD?
I like the idea of locking in 2 percent and not having to watch my TBM drift down. :happy
There is a 99.99999% chance that I will NOT need to do early withdrawal.
I have an emergency fund for those circumstances etc.

Thanks.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby learning_head » Wed May 22, 2013 8:46 am

Distribution yield is what got paid in the past, sec yield is what is likely to be paid in future. As old higher-yielding bonds mature and new lower-yield bonds are purchased instead, you expect yield in next year to be lower than yield in year before. Thus the difference.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby gerrym51 » Wed May 22, 2013 9:36 am

boater07 wrote:Thanks. I don't want to go out more than 5 years and brokered don't even come close 1.5%.
I like Kevin's original points and have also been trying to reduce my short/interm funds. As a matter of fact-already in MM.
I hope I don't get banned on the forum for my market timing 8-) . I'm always reminded by Larry S comments not to take more risk than necessary.
I'm fortunate to be able to get by on2-3% withdrawal rate.


i look at brokered cd's both original issue and secondary as guaranteed low interest bonds. if you look at them that way it changes perception :mrgreen:
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Wed May 22, 2013 1:05 pm

boater07 wrote:They asked me to request Vanguard to transfer funds based on my verbal request.

If you are describing this accurately, it's absurd, and you must be dealing with an inexperienced or poorly trained rep. Ask to talk to someone else--perhaps a supervisor.

boater07 wrote:This whole electronic system the credit union is using seems backward.

Interesting--my perception was exactly the opposite. The system worked smoothly, and I loved that I didn't have to print/sign/scan/email or mail anything, which I believe is a first for me (and I've done quite a few of these transfers). On one of the docs the rep had entered one thing incorrectly, and after I emailed her about it, I had an updated doc ready to sign in less than an hour, as I recall.

boater07 wrote:The telephone reps are not much help and the emails they promise-
don't show up.

Again, my experience was just the opposite, for the most part. I dealt with three or four reps at different stages of the process. There were a few glitches, but with one exception, they were resolved quickly and effectively. My only complaint is that when I noticed that the IRA money market account that had been created disappeared (before funds had arrived), the rep who I had been working with at that point did not return phone calls or emails. Since this didn't seem like a critical issue until the funds arrived, I didn't escalate.

When the funds did arrive, another rep called to tell me that they couldn't find my IRA application (she had already opened up the IRA money market account again), and asked if I would e-sign another one if they couldn't find it. I told her, "sure", but that the document was in their Docusign system, and I was sure I could find it if they couldn't. She said she'd call back if necessary, but apparently they found it (as did I with a quick check of Docusign).

A little later I logged on and saw the larger of the two transfers in the IRA money market (an intermediate step before moving into the CD), but one the other transfer sitting in the primary (taxable) account. So I called the rep back, and mentioned that it looked like they were making progress, but I noticed another glitch. Before I could mention it, she did, and told me she was already working on it. I logged on a little later, and saw everything in the CD.

One or two of the reps did mention to me that this all-electronic process was new for them, and they were still working out the kinks.

boater07 wrote:We Bogleheads have perhaps overwhelmed them with new business

Perhaps. I selfishly waited until the process was almost complete for me before publishing my blog post and posting here :wink:

Kevin
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Wed May 22, 2013 1:18 pm

learning_head wrote:Distribution yield is what got paid in the past, sec yield is what is likely to be paid in future. As old higher-yielding bonds mature and new lower-yield bonds are purchased instead, you expect yield in next year to be lower than yield in year before. Thus the difference.

This is roughly true, but it is more nuanced than that. If there is a large gap between distribution yield and SEC yield, you are more likely to earn something closer to the distribution yield next month (and the month after that, etc.); the distribution yield has been declining quite slowly for the Vanguard funds I've looked at, including the many I own or have owned.

I view the SEC yield as the best indicator of what I'll earn over a period equal to the average maturity of the fund (some might say the average duration). For a fund with a duration of five years, you could earn quite a bit more than the SEC yield for quite some time.

The other variable is the share price (NAV). Where distribution yield is higher than SEC yield, I expect the share price to come down over time, which is part of what affects the SEC yield, which accounts for the fact that bonds priced above par approach par as the bond approaches maturity.

So yes, there is some market timing involved in the decision to hold onto bond funds with distribution yields that are significantly higher than SEC yields (and CD yields). My policy has been to gradually shift out of bonds into CDs as bond fund yields come down, and good CD deals become available (FDIC/NCUA insurance limits are an issue for me).

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Re: Mountain America Credit Union 5-Year IRA CD

Postby boater07 » Wed May 22, 2013 2:27 pm

Kevin
Thanks for your original post. Looks as if we see things similarly.
However, your last reply to me doesn't sound as if it was glitch free. At least it was resolved.
My main problem has been to get them to answer their phones. I was told they are very busy.
It is now day 6 for me and still messing with it. Printing the forms on-line and mailing would have been faster.{but perhaps not handled quickly at their end}

My latest issue is the difference between a rollover form they e-mailed and a transfer. Perhaps, I misunderstand but feel I need transfer wording in the form.
My rep seems to be using the words interchangeably.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Wed May 22, 2013 3:04 pm

boater07 wrote:Kevin
My latest issue is the difference between a rollover form they e-mailed and a transfer. Perhaps, I misunderstand but feel I need transfer wording in the form.
My rep seems to be using the words interchangeably.

Sometimes the terms are used technically incorrectly. The key is the instructions in the form. The form I used has the word "transfer" in the title, and "transfer" in the instructions, and it is very clearly the type of form that has been used in all other IRA transfers I've done. I don't see the term "rollover" anywhere. So, it looks like they may indeed be using the wrong form. It sounds like maybe they are using a form to roll over from a 401K. I would escalate.

The form should instruct your current IRA custodian to transfer all or some of your current IRA to the new IRA custodian.

Yes, there were a few glitches for me, but I considered them minor relative to the benefits. The overall process went faster than previous transfers I've done, due to not having to mail them a form with my signature. It appears that they have gotten much busier since when I did my transfer. Sorry you are having so much trouble with them.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby xram » Wed May 22, 2013 4:41 pm

Just opened an account online with mountain America Credit union.
I'll let everybody know how the applicatiion process moves along.
Website said somebody should contact me within 24-48 hours.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby boater07 » Wed May 22, 2013 5:58 pm

Does anyone know whether Vanguard accepts "Docu Sign" for transfer forms.
Seems as if Mountain America prefers this way of doing signatures.
Don't really understand how this would work. My first experience with it and I know Vang does not accept fax.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Wed May 22, 2013 6:10 pm

boater07 wrote:Does anyone know whether Vanguard accepts "Docu Sign" for transfer forms.
Seems as if Mountain America prefers this way of doing signatures.
Don't really understand how this would work. My first experience with it and I know Vang does not accept fax.

Yes. Both Vanguard and Fidelity accepted the Docusign'd forms. I was wondering about this too before seeing that it worked.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby likashing » Wed May 22, 2013 6:38 pm

I plan to rollover some of my Vanguard ST treasury to this 5-year CD. What is the best method? Did you request a distribution/rollover check from Vanguard with the payee = MACU fob yourself, and then mail the check to MACU?
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Re: Mountain America Credit Union 5-Year IRA CD

Postby boater07 » Wed May 22, 2013 7:08 pm

Kevin
Please see PM
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Carpe » Wed May 22, 2013 7:19 pm

Kevin M wrote:
xram wrote:So I have total bond market in a Roth IRA at Vanguard.

I could "transfer" that Roth IRA to Mountain in order to take advantage of the CD being discussed?

Thanks
Xram

Yes. You can do a partial or complete transfer of your Vanguard IRA (Roth or Traditional) to another custodian, such as MACU, to put into CDs. I detailed the steps of my partial transfer from Vanguard to MACU in my blog post. As long as the new custodian provides both types of IRAs, it doesn't matter whether it's a tIRA or Roth.

I would keep some fixed income in a bond fund or other more liquid form for rebalancing purposes, although I personally wouldn't use TBM. The CDs serve as a (superior) replacement for the treasuries in TBM, so you could use an investment-grade bond fund to replace the non-treasury portion of TBM; i.e., you could create something similar to TBM, split between CDs and investment-grade bond funds.

Kevin


Hi Kevin,

Thanks for providing details of your experience.

Just wondering - how specific were you able to be with regards to the (partial) transfer? Were you able to specify a specific amount from a specific fund. Not sure what the options are, and what the possible pitfalls are either. Did you have to interact with Vanguard at all?
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Wed May 22, 2013 7:20 pm

likashing wrote:I plan to rollover some of my Vanguard ST treasury to this 5-year CD. What is the best method? Did you request a distribution/rollover check from Vanguard with the payee = MACU fob yourself, and then mail the check to MACU?

No, I avoid rollovers, and stick with direct custodian transfers. I described the process in some detail in my blog post, which is linked from the original post in this thread. In general, you work with the receiving custodian (in this case, MACU), and fill out (or they fill out) a transfer form, which you sign, and they send to Vanguard. This form instructs and authorizes the sending custodian (in this case, Vanguard) to transfer the funds to the receiving custodian. Vanguard then sends them a check, made out as instructed in the form. You never have to contact the sending custodian directly (at least I never have).

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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Wed May 22, 2013 7:37 pm

Carpe wrote:Just wondering - how specific were you able to be with regards to the (partial) transfer? Were you able to specify a specific amount from a specific fund. Not sure what the options are, and what the possible pitfalls are either. Did you have to interact with Vanguard at all?

Every transfer form I've used has similar options, which include complete or partial transfer, and immediate transfer or transfer on a specified future date (which you might use if you had a CD maturing, for example). I do believe this particular form had several lines you could use to specify specific assets. There was even an option to transfer the assets in kind, although this wouldn't make sense to purchase a CD.

I personally always have just liquidated whatever funds I wanted to reduce holdings in, and moved everything to a money market fund prior to doing the transfer (e.g., exchanged from a bond fund into the MM fund). I usually include the 4-digit fund number for the MM as a prefix to the account number, as Vanguard does. In the case of Fidelity, I just use the account number, and they automatically take it out of the money market. One advantage of doing it this way is you know exactly how much money will be in the fund, as opposed to say a bond fund which could fluctuate in value, but I assume you could transfer out of another type of fund.

Be sure to check this part carefully. I think I mentioned above that there was a glitch in the first transfer form they sent me. The glitch was that they specified total transfers instead of partial transfers with the specific amounts I had specified. In the past I always have filled out these forms myself, so never had this issue, but this time I just emailed them the info I knew they'd need, and they filled out the form. The form is only one page, and there are only a few items to enter, but be sure it's filled out correctly.

As I just mentioned in another response, no, you don't have to interact at all with the sending custodian, be it Vanguard or Fidelity (and as I recall, Schwab), although some custodians may operate differently.

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Re: Mountain America Credit Union 5-Year IRA CD

Postby Copper John » Wed May 22, 2013 9:52 pm

May application process has not gone smoothly. I applied online Tuesday, May 14th and received the confirmation message that I would be contacted by phone within 24-48 hours as mentioned above. The 48 hours passed and I had not heard back from MAC and I thought they are probably overwhelmed with applications as they currently are offering the highest 5 year CD rates. On Monday, May, 20th - six days later I called them and informed them I had not heard back from anyone. The phone representative took my information and said she would pass it on to the application department and they would contact me. Well as I post this it has been more than 48 hours since I called them and I had still not have not heard back from anyone.

I now decided I will not go forth with an application even if they contact me and have initiated an application at another credit union. It is a big enough hassle to move the bulk of my Vanguard bond holdings to multiple banks with multiple CDs to insure FDIC coverage without having to deal with this type of customer service.
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Re: Mountain America Credit Union 5-Year IRA CD

Postby boater07 » Wed May 22, 2013 10:14 pm

Sounds like my experience. Unfortunately, I persevered and am now stuck with a transfer if it works. If not-good bye TONTO
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Re: Mountain America Credit Union 5-Year IRA CD

Postby Kevin M » Wed May 22, 2013 10:20 pm

^Bummer! Well, this post has had almost 3,000 views (my blog post has had only about 240 views). Ken at DepositAccounts has had this on his list for awhile now, but I only noticed it being highlighted as one of the best 5-year CDs recently. I wonder how much of the swarm of business swamping them is due to Bogleheads.

Whatever the reason, they clearly are being overwhelmed with new business. I got my call-back the day after completing the online application, and everything else moved quickly and relatively smoothly after that.

Next thing you know, they'll drop their rate.

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