Share Certificate 3 year PenFed 2.02% apy
Share Certificate 3 year PenFed 2.02% apy
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Last edited by TT on Sun Feb 04, 2024 3:51 pm, edited 1 time in total.
Live Life Simple and Less Soft
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Re: Share Certificate 3 year PenFed 2.02% apy
Interesting, the 3,4,5, and 7 are all 2.02%
John
John
Re: Share Certificate 3 year PenFed 2.02% apy
Thanks-checked the site early this morning and only the 5 & 7 yr were 2%.TT wrote:https://www.penfed.org/
Re: Share Certificate 3 year PenFed 2.02% apy
TT........thanks for the info. Virtually grabbed the application from the mailman's hands and resubmitted for some shorter terms .
I checked the site a few minutes ago and initially 12 hrs ago and it reflected what you & john said.
I checked the site a few minutes ago and initially 12 hrs ago and it reflected what you & john said.
Re: Share Certificate 3 year PenFed 2.02% apy
I have never used pen fed are there any fees or charges other than early withdrawal for share certificates?
Thanks for info
bj
Thanks for info
bj
Re: Share Certificate 3 year PenFed 2.02% apy
Thanks saw this here before seeing in deposit accounts dot com
Re: Share Certificate 3 year PenFed 2.02% apy
On 3 yr max of 180 days interest.bamajames wrote:I have never used pen fed are there any fees or charges other than early withdrawal for share certificates?
Thanks for info
bj
- Van-Guard23
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Re: Share Certificate 3 year PenFed 2.02% apy
Thanks...went ahead and opened a 3-year CD as I slowly build my CD ladder. Too bad I pulled the trigger too early on the 4-year CD with an APY of "only" 1.76% with PenFed.
"I have only come here seeking knowledge. Things they wouldn't teach me of in college" |
The Police "Wrapped Around Your Finger"
Re: Share Certificate 3 year PenFed 2.02% apy
Man, thats tough, you lost $2.40 per $1000 a year.Van-Guard23 wrote:Thanks...went ahead and opened a 3-year CD as I slowly build my CD ladder. Too bad I pulled the trigger too early on the 4-year CD with an APY of "only" 1.76% with PenFed.
- Van-Guard23
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Re: Share Certificate 3 year PenFed 2.02% apy
MKP,MKP wrote:Man, thats tough, you lost $2.40 per $1000 a year.Van-Guard23 wrote:Thanks...went ahead and opened a 3-year CD as I slowly build my CD ladder. Too bad I pulled the trigger too early on the 4-year CD with an APY of "only" 1.76% with PenFed.
I inquired with PenFed (via their website message center) to see if I can redeem the 4-yr Certificate opened within the last month...to see if I can redeem it (since I have not received a dividend then there is nothing to pay according to their website: "If redeemed within 180 days of the issue date or any renewal date, all dividends will be forfeited") and then deposit the original amount to a new 4-yr Certificate to take advantage of the 2.02% APY (vice 1.76% APY less than a month ago). I guess I will find out soon enough if I can get this done.
"I have only come here seeking knowledge. Things they wouldn't teach me of in college" |
The Police "Wrapped Around Your Finger"
Re: Share Certificate 3 year PenFed 2.02% apy
Still pondering this move by PenFed. As in, why did they do it? What is the logic in a totally flat yield curve? As others noted, will this encourage folks to swap? In a rising rate environment, and all that? Do they know something we don't?
Folks, keep us posted.
Folks, keep us posted.
Re: Share Certificate 3 year PenFed 2.02% apy
Supply and demand. They couldn't attract enough deposits at 5/7 being 2.02 and they aren't willing to pay more for 5/7.john94549 wrote:Still pondering this move by PenFed. As in, why did they do it? What is the logic in a totally flat yield curve? As others noted, will this encourage folks to swap? In a rising rate environment, and all that? Do they know something we don't?
Folks, keep us posted.
Re: Share Certificate 3 year PenFed 2.02% apy
Great news! Thanks for sharing.
Kevin
Kevin
If I make a calculation error, #Cruncher probably will let me know.
PenFed 3-7 year CDs at 2.02%
[Thread merged into this one, see below. -- admin LadyGeek]
Saw this offer this morning. Pentagon Federal Credit Union is offering CDs between 3 and 7 years at 2.02% APY.
https://www.penfed.org/Money-Market-Cer ... WT.ac=1161
For comparison, the current Ally Bank 5-year CD rate is 1.60%, and the next best 3-year CD on Bankrate is 1.45%.
Saw this offer this morning. Pentagon Federal Credit Union is offering CDs between 3 and 7 years at 2.02% APY.
https://www.penfed.org/Money-Market-Cer ... WT.ac=1161
For comparison, the current Ally Bank 5-year CD rate is 1.60%, and the next best 3-year CD on Bankrate is 1.45%.
Retirement investing is a marathon.
Re: PenFed 3-7 year CDs at 2.02%
Stanford Federal Credit union has a 5 year CD at 2.2% ; https://www.sfcu.org/rates/certificates
Re: PenFed 3-7 year CDs at 2.02%
Seems a bit disingenuous to make that direct comparison without mentioning the fine print - to get that rate, you need:wwhan wrote:Stanford Federal Credit union has a 5 year CD at 2.2% ; https://www.sfcu.org/rates/certificates
(a) CD of >$100,000 only
(b) checking account with direct deposit of at least $500/month
(c) Key product with SFCU (non-CD account > $50,000, credit card with at least $500/month in charges or carrying a large balance, auto loan, mortgage, HELOC > $50,000 balance)
(d) Second key product from the above categories
Kind of like the 'rewards checking' accounts that will give you decent rates on lower balances if you jump through a few hoops, except that this has even more hoops.
Anyhow, as this is a duplicate thread, I'm going to request to the mods that it be locked.
Retirement investing is a marathon.
Re: PenFed 3-7 year CDs at 2.02%
Translation: SFCU doesn't want drive-by CD investors, only ongoing customers. I can only sympathize with that, and I think it's the main gambit of banks / CUs paying more than the going rates anyway, except many of them are hoping that you stay even if you're free to go. Different strategy, same desired outcome.
Something else to consider is that $100K in SFCU's area of operations is not as outrageous as it sounds, if it's your only bank.
Something else to consider is that $100K in SFCU's area of operations is not as outrageous as it sounds, if it's your only bank.
Re: Share Certificate 3 year PenFed 2.02% apy
FYI - I merged a similar thread into here. This (combined) thread is now in the Investing - Theory, News & General forum (investing news).
- Van-Guard23
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Re: Share Certificate 3 year PenFed 2.02% apy
Just an update...I was able to close the 4-year Certificate opened thru PenFed less than a month ago and opened a new 4-year Certificate to take advantage of the higher APY. Had to go thru some "small" hoops but it was worth it to get the 2.02% APY over the previous 1.76% APYVan-Guard23 wrote:MKP,MKP wrote:Man, thats tough, you lost $2.40 per $1000 a year.Van-Guard23 wrote:Thanks...went ahead and opened a 3-year CD as I slowly build my CD ladder. Too bad I pulled the trigger too early on the 4-year CD with an APY of "only" 1.76% with PenFed.
I inquired with PenFed (via their website message center) to see if I can redeem the 4-yr Certificate opened within the last month...to see if I can redeem it (since I have not received a dividend then there is nothing to pay according to their website: "If redeemed within 180 days of the issue date or any renewal date, all dividends will be forfeited") and then deposit the original amount to a new 4-yr Certificate to take advantage of the 2.02% APY (vice 1.76% APY less than a month ago). I guess I will find out soon enough if I can get this done.
"I have only come here seeking knowledge. Things they wouldn't teach me of in college" |
The Police "Wrapped Around Your Finger"
Re: Share Certificate 3 year PenFed 2.02% apy
Very cool. It's great that the PenFed EWP doesn't eat into principal, which it does at most other institutions at which I own CDs.Van-Guard23 wrote: ... I have not received a dividend then there is nothing to pay according to their website ...
Just an update...I was able to close the 4-year Certificate opened thru PenFed less than a month ago and opened a new 4-year Certificate to take advantage of the higher APY. Had to go thru some "small" hoops but it was worth it to get the 2.02% APY over the previous 1.76% APY
Even though you hadn't received a dividend, you still lost the little bit of interest that had accrued since you opened the CD. If you held it one month, you lost about 1.76%/12 = 0.146%, which clearly is worth giving up to get an additional 26 basis points (0.26%) in interest per year for four years. You will make up the lost interest in a little less than 7 months if my calculations are correct. Of course if you only held the CD for 3 weeks, you lost less interest and will make it up faster.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Share Certificate 3 year PenFed 2.02% apy
Yeah, the new Relationship plan at Stanford Federal Credit Union is a bit of a pain & yes I did need to adjust/adapt to reach the new requirements. The SFCU Relationship plan requirements are pretty new & have only been in place for only a few months.
All Credit Unions have fine print. To buy CDs at PenFed, I had to join the Millitary Families Association, so I made some donations to that non-profit & will do so in the future. My dad was in WWII and my uncle was in the Korean war.
All Credit Unions have fine print. To buy CDs at PenFed, I had to join the Millitary Families Association, so I made some donations to that non-profit & will do so in the future. My dad was in WWII and my uncle was in the Korean war.
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Re: Share Certificate 3 year PenFed 2.02% apy
TT,
Just my personal opinion, but I think putting money into FCU's five year CD at about 2% makes sense. I believe that we are at the beginning of a gradual trend of rising interest rates. These things are cyclical and rates are unlikely to stay low indefinitely. You really can't lose by buying now. If you surrender the CD in one year to buy a new one at potentially higher rates, you still will have netted 1% on your investment.
I also recommend developing a mindset of using CD's instead of bonds for the fixed portion of your investments.
Just my personal opinion, but I think putting money into FCU's five year CD at about 2% makes sense. I believe that we are at the beginning of a gradual trend of rising interest rates. These things are cyclical and rates are unlikely to stay low indefinitely. You really can't lose by buying now. If you surrender the CD in one year to buy a new one at potentially higher rates, you still will have netted 1% on your investment.
I also recommend developing a mindset of using CD's instead of bonds for the fixed portion of your investments.
Re: Share Certificate 3 year PenFed 2.02% apy
Anyone know if you can transfer an IRA to PenFed 3y CD ?
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
Last edited by Bustoff on Sat Nov 09, 2013 6:09 am, edited 1 time in total.
Re: Share Certificate 3 year PenFed 2.02% apy
Yes, but it needs to arrive at PF before the end of the month. When I've done transfers, they have typically taken about two weeks.
Maybe someone can weigh in with a faster way.
Maybe someone can weigh in with a faster way.
Re: Share Certificate 3 year PenFed 2.02% apy
delete
Last edited by TT on Sun Feb 04, 2024 6:37 am, edited 1 time in total.
Live Life Simple and Less Soft
Re: Share Certificate 3 year PenFed 2.02% apy
Why wouldn't you investigate on your own?Bustoff wrote:Anyone know if you transfer IRA to PenFed 3y CD ?
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
Opening an IRA Account / ROTH IRA / Converting IRA to ROTH
2. If you would like to transfer a preexisting IRA to PenFed, complete and return all three copies of the IRA Transfer Authorization form on page 12. If you are 70½ or older, please note the special instructions on the form for traditional IRAs.
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
Re: Share Certificate 3 year PenFed 2.02% apy
I did. However, when I woke up this morning and saw this thread it was before I had my coffee and when I went to the PenFed website and clicked on IRA's, then clicked on Traditional IRA Share Account, (since I have a TIRA) but it showed a rate of only .10%... so I came back here with my question and then had my coffee then went back to the PenFed site then finally noticed "IRA Certificates", then came back here and saw your reply.YDNAL wrote:Why wouldn't you investigate on your own?Bustoff wrote:Anyone know if you transfer IRA to PenFed 3y CD ?
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
Thanks Landy!YDNAL wrote:Opening an IRA Account / ROTH IRA / Converting IRA to ROTH
2. If you would like to transfer a preexisting IRA to PenFed, complete and return all three copies of the IRA Transfer Authorization form on page 12. If you are 70½ or older, please note the special instructions on the form for traditional IRAs.
Re: Share Certificate 3 year PenFed 2.02% apy
Good. In the link, pull the PDF under the title above, read it carefully, and complete forms as requested.Bustoff wrote:... so I came back here with my question and then had my coffee then went back to the PenFed site then finally noticed "IRA Certificates", then came back here and saw your reply.
Thanks Landy!YDNAL wrote:Opening an IRA Account / ROTH IRA / Converting IRA to ROTH
2. If you would like to transfer a preexisting IRA to PenFed, complete and return all three copies of the IRA Transfer Authorization form on page 12. If you are 70½ or older, please note the special instructions on the form for traditional IRAs.
Now my question. Why would you cancel a Vanguard IRA, go through the entire process to transfer to a Credit Union for the *grand return* of 2.02% (per OP) 3-year CD ???
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
Re: Share Certificate 3 year PenFed 2.02% apy
YDNAL wrote:Good. In the link, pull the PDF under the title above, read it carefully, and complete forms as requested.Bustoff wrote:... so I came back here with my question and then had my coffee then went back to the PenFed site then finally noticed "IRA Certificates", then came back here and saw your reply.
Thanks Landy!YDNAL wrote:Opening an IRA Account / ROTH IRA / Converting IRA to ROTH
2. If you would like to transfer a preexisting IRA to PenFed, complete and return all three copies of the IRA Transfer Authorization form on page 12. If you are 70½ or older, please note the special instructions on the form for traditional IRAs.
Now my question. Why would you cancel a Vanguard IRA, go through the entire process to transfer to a Credit Union for the *grand return* of 2.02% (per OP) 3-year CD ???
Landy - in all honesty it's Fear. I have way too much sitting in Prime Money Market that I afraid of putting into Total Bond Fund.
Re: Share Certificate 3 year PenFed 2.02% apy
Landy, a custodian-to-custodian IRA transfer is relatively painless. You phone PenFed, they send you the forms, you send them back. Each time I've done it, I indicate on the instructions (which go to Vanguard) which fund (or part of a fund) to tap. Usually, it's VMMXX.
That said, as to the larger issue, some folks might prefer a 3-yr at 2%, with no principal risk, than a bond fund. Nothing wrong with IRA CD ladders. Starting to build a ladder with a 3-yr at 2% is reasonable, in my view. In addition, there's nothing to prevent a person from building (or rolling) an IRA CD ladder while still investing in tax-advantaged bond funds. We do.
That said, as to the larger issue, some folks might prefer a 3-yr at 2%, with no principal risk, than a bond fund. Nothing wrong with IRA CD ladders. Starting to build a ladder with a 3-yr at 2% is reasonable, in my view. In addition, there's nothing to prevent a person from building (or rolling) an IRA CD ladder while still investing in tax-advantaged bond funds. We do.
Re: Share Certificate 3 year PenFed 2.02% apy
John, yes a matter of preference. But it should be a matter of overall diversification, effectiveness, liquidity, ease of withdrawal for the retired, etc. etc. BTW, I don't recall many "CD ladder" threads 5-6 years ago, but I do see today many yield-chasing threads - *strategy du jour*.john94549 wrote:Landy, a custodian-to-custodian IRA transfer is relatively painless. You phone PenFed, they send you the forms, you send them back. Each time I've done it, I indicate on the instructions (which go to Vanguard) which fund (or part of a fund) to tap. Usually, it's VMMXX.
That said, as to the larger issue, some folks might prefer a 3-yr at 2%, with no principal risk, than a bond fund. Nothing wrong with IRA CD ladders. Starting to build a ladder with a 3-yr at 2% is reasonable, in my view. In addition, there's nothing to prevent a person from building (or rolling) an IRA CD ladder while still investing in tax-advantaged bond funds. We do.
Bustoff is 60yo and 1/2 the portfolio in Vanguard tax advantaged - presumably IRA.
http://www.bogleheads.org/forum/viewtop ... 5#p1567535
I wouldn't move 50% of assets to a credit union to chase yield.
2¢Bustoff » Sat Nov 09, 2013 8:21 am wrote:Anyone know if you can transfer an IRA to PenFed 3y CD ?
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
Re: Share Certificate 3 year PenFed 2.02% apy
Thanks Landy - It's actually only the portion of my IRA sitting in Prime Money Market with an expense ratio that's 16X higher than it's yield. My IRA also holds Wellesley Admiral, Total Bond Market Admiral and Short-Term Bond Index Admiral Shares. I just don't feel comfortable having the entire IRA balance at risk.YDNAL wrote:John, yes a matter of preference. But it should be a matter of overall diversification, effectiveness, liquidity, ease of withdrawal for the retired, etc. etc. BTW, I don't recall many "CD ladder" threads 5-6 years ago, but I do see today many yield-chasing threads - *strategy du jour*.john94549 wrote:Landy, a custodian-to-custodian IRA transfer is relatively painless. You phone PenFed, they send you the forms, you send them back. Each time I've done it, I indicate on the instructions (which go to Vanguard) which fund (or part of a fund) to tap. Usually, it's VMMXX.
That said, as to the larger issue, some folks might prefer a 3-yr at 2%, with no principal risk, than a bond fund. Nothing wrong with IRA CD ladders. Starting to build a ladder with a 3-yr at 2% is reasonable, in my view. In addition, there's nothing to prevent a person from building (or rolling) an IRA CD ladder while still investing in tax-advantaged bond funds. We do.
Bustoff is 60yo and 1/2 the portfolio in Vanguard tax advantaged - presumably IRA.
http://www.bogleheads.org/forum/viewtop ... 5#p1567535
I wouldn't move 50% of assets to a credit union to chase yield.2¢Bustoff » Sat Nov 09, 2013 8:21 am wrote:Anyone know if you can transfer an IRA to PenFed 3y CD ?
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
Re: Share Certificate 3 year PenFed 2.02% apy
Yes, I've only know them to stop in the middle of the month once. It's best to initiate an IRA transfer to a credit union at the beginning of the month, since CUs tend to reset on the first of the month.TT wrote:I noticed PenFed has this verbiage at bottom of the page now.I thought they honored the posted rates for an entire month?"Annual Percentage Yield (APY) is accurate as of November 01, 2013 - November 30, 2013 and is subject to change at any time."
Re: Share Certificate 3 year PenFed 2.02% apy
Thanks for posting about this. An ad for it popped up on my computer yesterday and I was thinking it was the best rate I've seen for that short a term without a significant catch. I've never banked at PenFed.
I have a significant amount of cash just sitting at Barclay earning about .8 so was thinking it might be better to move it into this PenFed share certificate. If I know I won't need it before 5 years so should I go for the 5 year term or is there an advantage for going shorter and taking the 3 year?
If that's a stupid Q please don't flog me with it, you experienced Bogleheads often point out an angle or wrinkle I didn't think of!
Thanks.
I have a significant amount of cash just sitting at Barclay earning about .8 so was thinking it might be better to move it into this PenFed share certificate. If I know I won't need it before 5 years so should I go for the 5 year term or is there an advantage for going shorter and taking the 3 year?
If that's a stupid Q please don't flog me with it, you experienced Bogleheads often point out an angle or wrinkle I didn't think of!
Thanks.
Re: Share Certificate 3 year PenFed 2.02% apy
If you don't know the answer, it's not a stupid Q. The idea is that you should match your investments to your time horizon.
If you have 30 years to retirement, then you setup your investments with 30 year bonds. If you need the money to buy a house in 5 years, then buy a 5 year CD.
If you have 30 years to retirement, then you setup your investments with 30 year bonds. If you need the money to buy a house in 5 years, then buy a 5 year CD.
Re: Share Certificate 3 year PenFed 2.02% apy
Thanks Lady Geek. Not so straight forward because I don't have a time line for that $. Not earmarked for anything in particular at this point, but do want to keep it in something relatively liquid incase that changes and don't want to lock it up for ages if a better rate comes along. If that makes any sense.LadyGeek wrote:If you don't know the answer, it's not a stupid Q. The idea is that you should match your investments to your time horizon.
If you have 30 years to retirement, then you setup your investments with 30 year bonds. If you need the money to buy a house in 5 years, then buy a 5 year CD.
Re: Share Certificate 3 year PenFed 2.02% apy
Sure, that makes sense. The other part of the answer is how much of a penalty you will take for early withdrawal. If you need the money earlier, where's the break point that makes going with the longer term worthwhile?
See: Comparing CDs
See: Comparing CDs
Re: Share Certificate 3 year PenFed 2.02% apy
Thanks.Bustoff wrote:Thanks Landy - It's actually only the portion of my IRA sitting in Prime Money Market with an expense ratio that's 16X higher than it's yield. My IRA also holds Wellesley Admiral, Total Bond Market Admiral and Short-Term Bond Index Admiral Shares. I just don't feel comfortable having the entire IRA balance at risk.YDNAL wrote:Bustoff is 60yo and 1/2 the portfolio in Vanguard tax advantaged - presumably IRA.
http://www.bogleheads.org/forum/viewtop ... 5#p1567535
I wouldn't move 50% of assets to a credit union to chase yield.2¢Bustoff » Sat Nov 09, 2013 8:21 am wrote:Anyone know if you can transfer an IRA to PenFed 3y CD ?
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
I would weigh the overall implications and ramifications of having another account at a credit union. After all, interest rate moves/changes, and we discussing here a rate of 2.02% [nominal] for 3 years. I realize that you are concerned with Bonds (and Bond funds) by your many threads on this. I also fear that you may not fully-comprehend *duration*, and may not be matching your Fixed Income with need.
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
Re: Share Certificate 3 year PenFed 2.02% apy
Can you recommend some reading material or other source of guidance on duration and matching ones Fixed Income with need ?YDNAL wrote: I realize that you are concerned with Bonds (and Bond funds) by your many threads on this. I also fear that you may not fully-comprehend *duration*, and may not be matching your Fixed Income with need.
Thanks
Re: Share Certificate 3 year PenFed 2.02% apy
It's a popular topic, if you know what to search for: match duration time horizon - Google Search
This article from Fidelity looks useful: Schwab Bond Insights: Why Your Time Horizon Matters in Fixed Income Investing
This discussion might be straying a bit from CDs. Feel free to start a new thread, or find an existing one to jump on.
This article from Fidelity looks useful: Schwab Bond Insights: Why Your Time Horizon Matters in Fixed Income Investing
This discussion might be straying a bit from CDs. Feel free to start a new thread, or find an existing one to jump on.
Re: Share Certificate 3 year PenFed 2.02% apy
This is not a new subject since Robert Merton (Applying life-cycle economics) has worked on this subject.Bustoff wrote:Can you recommend some reading material or other source of guidance on duration and matching ones Fixed Income with need ?YDNAL wrote: I realize that you are concerned with Bonds (and Bond funds) by your many threads on this. I also fear that you may not fully-comprehend *duration*, and may not be matching your Fixed Income with need.
Thanks
Of course, I also like Bernstein e-book on liability matching. HERE is Wade Pfau's review and synopsis.
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
Re: Share Certificate 3 year PenFed 2.02% apy
It's an excellent question.island wrote: I have a significant amount of cash just sitting at Barclay earning about .8 so was thinking it might be better to move it into this PenFed share certificate. If I know I won't need it before 5 years so should I go for the 5 year term or is there an advantage for going shorter and taking the 3 year?
If that's a stupid Q please don't flog me with it, you experienced Bogleheads often point out an angle or wrinkle I didn't think of!
Thanks.
The main advantage of of the 3-year is that there is less term (interest-rate) risk. Either way the interest-rate risk of one of these CDs is minimal compared to a bond of comparable maturity or a bond fund. Usually longer-maturity debt instruments have higher yields to compensate for the term risk. With this deal you are getting the yield of a 5-year CD but with the term risk of a 3-year CD.
For a direct CD (purchased directly, not through a broker), the term risk is limited to the early withdrawal penalty (EWP). The EWP for the 3-year CD is 180 days of interest; for the 5-year it's 365 days of interest. For a 2% CD this caps your downside at 1% for the 3-year and 2% for the 5-year. So, for example, if rates go up a lot in one year and you want to "break" the CD to reinvest at the higher rate, you will still earn 1% on the 3-year after paying the EWP, but 0% on the 5-year. At two years you'd earn a cumulative 3% on the 3-year and 2% on the 5-year. I'm ignoring compounding which is minimal anyway.
Similarly, the shorter 3-year term allows you to roll the CD into another CD with no penalty in 3 years instead of 5, which is good if interest rates are higher three years from now. So at 3-years you'd earn a cumulative 6% on the 3-year (no penalty) and 4% on the 5-year (if you broke it). Of course the converse is true; if rates are lower three years from now, you'll wish you had purchased the 5-year CD. Personally I would bet on higher rates in three years, and go for the 3-year. Or, you could hedge your bets and buy one of each, creating somewhat of a ladder.
A nice feature of PenFed CDs is that the EWP does not eat into principal, so if you were to do an early withdrawal in less than 180 days you would earn 0% on either CD; i.e., you would get all of your principal back.
My partner has been deploying money from a real estate sale into CDs over the last few weeks. All have been 5-year CDs earning 2% with EWPs of 180 days of interest. When this PenFed 3-year CD came out, she jumped on it. Incidentally, like you, her cash for this particular CD was at Barclays.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Share Certificate 3 year PenFed 2.02% apy
Thank you LadyGeek.LadyGeek wrote:It's a popular topic, if you know what to search for: match duration time horizon - Google Search
This article from Fidelity looks useful: Schwab Bond Insights: Why Your Time Horizon Matters in Fixed Income Investing
This discussion might be straying a bit from CDs. Feel free to start a new thread, or find an existing one to jump on.
Re: Share Certificate 3 year PenFed 2.02% apy
I read the e-book also. Do you remember what Bernstein recommended for Fenwick Frick's IRA ?YDNAL wrote:This is not a new subject since Robert Merton (Applying life-cycle economics) has worked on this subject.Bustoff wrote:Can you recommend some reading material or other source of guidance on duration and matching ones Fixed Income with need ?YDNAL wrote: I realize that you are concerned with Bonds (and Bond funds) by your many threads on this. I also fear that you may not fully-comprehend *duration*, and may not be matching your Fixed Income with need.
Thanks
Of course, I also like Bernstein e-book on liability matching. HERE is Wade Pfau's review and synopsis.
Thank you very much for the Merton link !
- Van-Guard23
- Posts: 262
- Joined: Fri Jan 04, 2008 10:10 pm
- Location: Physically in Central TX...mentally, Hawai'i
Re: Share Certificate 3 year PenFed 2.02% apy
island,island wrote:Thanks for posting about this. An ad for it popped up on my computer yesterday and I was thinking it was the best rate I've seen for that short a term without a significant catch. I've never banked at PenFed.
I have a significant amount of cash just sitting at Barclay earning about .8 so was thinking it might be better to move it into this PenFed share certificate. If I know I won't need it before 5 years so should I go for the 5 year term or is there an advantage for going shorter and taking the 3 year?
If that's a stupid Q please don't flog me with it, you experienced Bogleheads often point out an angle or wrinkle I didn't think of!
Thanks.
I opened a 3-year and 4-year Share Certificates with PenFed recently to slowly build my CD ladder. You mentioned "a significant amount of cash"...note that a single Share Certificate account is capped at $25,000. The maximum amount is not explicitly stated on the website but you will see this in fine print as you go through the process of opening an account (unless this only applied to external bank transfers into PenFed). Just FYI to temper expectations.
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Re: Share Certificate 3 year PenFed 2.02% apy
Perhaps this is because you just became a member of PenFed? My partner just bought a $100K certificate (non-IRA) with an ACH transfer from a bank that was not even previously connected to PenFed. I do seem to recall that she previously had a problem transferring an even smaller amount to buy two IRA CDs online, but she called and the rep was able to override the daily transfer limit. That may have been when she first joined the CU. When I first joined a few years ago, I purchased a $100K certificate via a custodian to custodian IRA transfer.Van-Guard23 wrote:...note that a single Share Certificate account is capped at $25,000. The maximum amount is not explicitly stated on the website but you will see this in fine print as you go through the process of opening an account (unless this only applied to external bank transfers into PenFed). Just FYI to temper expectations.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Share Certificate 3 year PenFed 2.02% apy
Yes, and unlike some others who have replied to you, I think it's an excellent idea. I have done a number of partial transfers out of IRAs at Vanguard and Fidelity to buy CDs at banks and credit unions, including PenFed. As already pointed out, there is a risk that the rate will drop before the transfer is complete, and in my experience PenFed will not honor the rate if this happens (it happened to my Mom). To speed up the process, do as much as you can online and by email and fax, and use overnight mail. Give them Vanguard's overnight mail address on the form, and ask PenFed to use overnight mail. You also can ask if they will reverse the transfer if the rate drops below an acceptable rate before it is complete.Bustoff wrote:Anyone know if you can transfer an IRA to PenFed 3y CD ?
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
Just because you have a 30-year investment horizon does not mean you should be buying 30-year bonds. I suspect most Bogleheads have most of their fixed income in short to intermediate term bond funds, with average maturities between 3 and 8 years. The popular Total Bond Market index fund has an average maturity of 7.4 years and duration of 5.4 years.
Taking advantage of direct CDs is not yield chasing. It is taking advantage of an opportunity only retail investors have (because of the limited federal insurance) to get a better risk/return tradeoff than with bonds or bond funds. "Yield chasing" is more often applied to those who are taking more risk for higher yield, like buying high-yield bond funds, longer-maturity bond funds or even dividend paying stocks. With direct CDs you are actually earning a higher yield with less risk. A 3-year treasury yields 0.6%, so with the PenFed 3-year CD you are earning more than 3X as much without taking the term risk. A 5-year treasury yields 1.4%, so the PenFed 5-year CD also is a much better deal.
Total Bond Market SEC yield is a 2.15% (Admiral shares). Why is it yielding more than a 5-year treasury? Because it is riskier. It includes corporate bonds and some longer-maturity bonds, as well as lower yielding treasuries. A 5-year direct CD earning 2% gives you about the same yield with less risk. A 3-year direct CD earning 2% gives you almost the same yield with even less term risk.
Yes, there are other concerns besides yield and risk, like simplicity, liquidity, etc., and of course these things should be considered. Also, CDs obviously aren't an option in 401k/403b/457 retirement plans.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Share Certificate 3 year PenFed 2.02% apy
Kevin - Thank you for an excellent post.Kevin M wrote:Yes, and unlike some others who have replied to you, I think it's an excellent idea. I have done a number of partial transfers out of IRAs at Vanguard and Fidelity to buy CDs at banks and credit unions, including PenFed. As already pointed out, there is a risk that the rate will drop before the transfer is complete, and in my experience PenFed will not honor the rate if this happens (it happened to my Mom). To speed up the process, do as much as you can online and by email and fax, and use overnight mail. Give them Vanguard's overnight mail address on the form, and ask PenFed to use overnight mail. You also can ask if they will reverse the transfer if the rate drops below an acceptable rate before it is complete.Bustoff wrote:Anyone know if you can transfer an IRA to PenFed 3y CD ?
I would be interested in moving my Vanguard IRA sitting in Vanguard Prime Money Market to PenFed.
Just because you have a 30-year investment horizon does not mean you should be buying 30-year bonds. I suspect most Bogleheads have most of their fixed income in short to intermediate term bond funds, with average maturities between 3 and 8 years. The popular Total Bond Market index fund has an average maturity of 7.4 years and duration of 5.4 years.
Taking advantage of direct CDs is not yield chasing. It is taking advantage of an opportunity only retail investors have (because of the limited federal insurance) to get a better risk/return tradeoff than with bonds or bond funds. "Yield chasing" is more often applied to those who are taking more risk for higher yield, like buying high-yield bond funds, longer-maturity bond funds or even dividend paying stocks. With direct CDs you are actually earning a higher yield with less risk. A 3-year treasury yields 0.6%, so with the PenFed 3-year CD you are earning more than 3X as much without taking the term risk. A 5-year treasury yields 1.4%, so the PenFed 5-year CD also is a much better deal.
Total Bond Market SEC yield is a 2.15% (Admiral shares). Why is it yielding more than a 5-year treasury? Because it is riskier. It includes corporate bonds and some longer-maturity bonds, as well as lower yielding treasuries. A 5-year direct CD earning 2% gives you about the same yield with less risk. A 3-year direct CD earning 2% gives you almost the same yield with even less term risk.
Yes, there are other concerns besides yield and risk, like simplicity, liquidity, etc., and of course these things should be considered. Also, CDs obviously aren't an option in 401k/403b/457 retirement plans.
Kevin
Re: Share Certificate 3 year PenFed 2.02% apy
Kevin- Thanks for taking the time to post this and your other detailed responses. Very helpful to read your rationale. I think the 3 year term makes the most sense for me.Kevin M wrote:It's an excellent question.island wrote: I have a significant amount of cash just sitting at Barclay earning about .8 so was thinking it might be better to move it into this PenFed share certificate. If I know I won't need it before 5 years so should I go for the 5 year term or is there an advantage for going shorter and taking the 3 year?
If that's a stupid Q please don't flog me with it, you experienced Bogleheads often point out an angle or wrinkle I didn't think of!
Thanks.
The main advantage of of the 3-year is that there is less term (interest-rate) risk. Either way the interest-rate risk of one of these CDs is minimal compared to a bond of comparable maturity or a bond fund. Usually longer-maturity debt instruments have higher yields to compensate for the term risk. With this deal you are getting the yield of a 5-year CD but with the term risk of a 3-year CD.
For a direct CD (purchased directly, not through a broker), the term risk is limited to the early withdrawal penalty (EWP). The EWP for the 3-year CD is 180 days of interest; for the 5-year it's 365 days of interest. For a 2% CD this caps your downside at 1% for the 3-year and 2% for the 5-year. So, for example, if rates go up a lot in one year and you want to "break" the CD to reinvest at the higher rate, you will still earn 1% on the 3-year after paying the EWP, but 0% on the 5-year. At two years you'd earn a cumulative 3% on the 3-year and 2% on the 5-year. I'm ignoring compounding which is minimal anyway.
Similarly, the shorter 3-year term allows you to roll the CD into another CD with no penalty in 3 years instead of 5, which is good if interest rates are higher three years from now. So at 3-years you'd earn a cumulative 6% on the 3-year (no penalty) and 4% on the 5-year (if you broke it). Of course the converse is true; if rates are lower three years from now, you'll wish you had purchased the 5-year CD. Personally I would bet on higher rates in three years, and go for the 3-year. Or, you could hedge your bets and buy one of each, creating somewhat of a ladder.
A nice feature of PenFed CDs is that the EWP does not eat into principal, so if you were to do an early withdrawal in less than 180 days you would earn 0% on either CD; i.e., you would get all of your principal back.
My partner has been deploying money from a real estate sale into CDs over the last few weeks. All have been 5-year CDs earning 2% with EWPs of 180 days of interest. When this PenFed 3-year CD came out, she jumped on it. Incidentally, like you, her cash for this particular CD was at Barclays.
Kevin
Van-Guard- Thanks for the heads up about account limit. OK expectations tempered, but bummer, I was hoping to sock away more that that. An amount morer similar to Kevin's partner was what I had in mind. I don't have an account there and maybe they do limit size for new accounts. I'll have to check it out tomorrow. Not even sure if I qualify to open one there at all. Need to check out all those qualifications.
LadyGeek- Thanks for the additional links. You are Link Guru and I appreciate it!