Ally CDs rates going up within 4 years?
Ally CDs rates going up within 4 years?
I'm trying to decide on a CD for part of our emergency fund. We probabably won't need the money for many years, if ever but you never know. Therefore, I like Ally's 60 day penalty for early withdraw, as opposed to PenFed's 180 days for less than 5 year terms. (PedFed 4 year is currently 1.63%)
I'm trying to decide between:
1. the Raise your Rate 4 year at 1.44% which allows for two raises if rates go up
2. 5 year regular CD at 1.71%
As rates have been so flat and even been going down I'm curious what the insightful people here think the chances are of rates going up. Obviously, if rates don't increase the raise your rate aspect is worthless.
Thanks,
Jeremy
I'm trying to decide between:
1. the Raise your Rate 4 year at 1.44% which allows for two raises if rates go up
2. 5 year regular CD at 1.71%
As rates have been so flat and even been going down I'm curious what the insightful people here think the chances are of rates going up. Obviously, if rates don't increase the raise your rate aspect is worthless.
Thanks,
Jeremy
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Re: Ally CDs rates going up within 4 years?
Hi Jeremy:
Best wishes.
Taylor
I'm not that "insightful." I know what I don't know.I'm curious what the insightful people here think the chances are of rates going up.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
-
- Posts: 9881
- Joined: Mon Sep 07, 2009 2:57 pm
- Location: Milky Way
Re: Ally CDs rates going up within 4 years?
+1Taylor Larimore wrote:Hi Jeremy:
I'm not that "insightful." I know what I don't know.I'm curious what the insightful people here think the chances are of rates going up.
Best wishes.
Taylor
Best regards, -Op |
|
"In the middle of difficulty lies opportunity." Einstein
Re: Ally CDs rates going up within 4 years?
Ok, then if you were in my position how would you determine which one to put money into?
Or maybe PenFed is better, as 10K's interest is:
$567.51 for 1.44% for 46 months (4 yrs minus 2 months)
$587.07 for 1.63% for 42 months (4 yrs minus 6 months)
Or maybe PenFed is better, as 10K's interest is:
$567.51 for 1.44% for 46 months (4 yrs minus 2 months)
$587.07 for 1.63% for 42 months (4 yrs minus 6 months)
Re: Ally CDs rates going up within 4 years?
If you aren't already making use of I-Bonds, I would suggest filling up that space first. You will get better interest than CDs (currently) as well as tax advantages. Note however that you can't redeem them for the first 12 months.
-
- Posts: 9881
- Joined: Mon Sep 07, 2009 2:57 pm
- Location: Milky Way
Re: Ally CDs rates going up within 4 years?
Given that rates have a lot more room in the up direction than the down direction, I would opt for the bump-up CD.
Best regards, -Op |
|
"In the middle of difficulty lies opportunity." Einstein
Re: Ally CDs rates going up within 4 years?
Placing that EF in a CD (any CD, bump-up or not) has "availability" risk. If you really, truly, need the money, and the funds have that "in our discretion" or "with our permission" early withdrawal clause, you might be unhappy. While that does not appear to apply to Ally, you should note that if you choose to withdraw any funds from a CD, you must withdraw all funds. Partial withdrawals from a CD are not permitted. Ally differs from other institutions, where partial CD withdrawals are permitted, and the EWP applies only to funds withdrawn. This is often buried in the "fine print" of CD disclosures.
Stated another way, that modest 60-day EWP might not be so modest if applied to your entire CD, when all you need is 10% of it. If you have $100K in a CD, and need $10K, would you rather pay 60 days on the whole (roughly $291) or 180 days on the amount withdrawn (roughly $88).
Feel free to correct my math, but I suspect Ally already figured it out.
Stated another way, that modest 60-day EWP might not be so modest if applied to your entire CD, when all you need is 10% of it. If you have $100K in a CD, and need $10K, would you rather pay 60 days on the whole (roughly $291) or 180 days on the amount withdrawn (roughly $88).
Feel free to correct my math, but I suspect Ally already figured it out.
Re: Ally CDs rates going up within 4 years?
That's why I have 8 5-yr CDs at Ally, all maturing at the same time. I had 9 but I needed the money and closed one already.Stated another way, that modest 60-day EWP might not be so modest if applied to your entire CD, when all you need is 10% of it.
High risk does not equal high reward. It equals high risk of no reward.
Re: Ally CDs rates going up within 4 years?
Ouch. And I thought I had laddering issues. The reason you bought 8, as opposed to one, was (fill in the blank).auntie wrote:
That's why I have 8 5-yr CDs at Ally, all maturing at the same time.
Nothing maturing here until 2014.
Re: Ally CDs rates going up within 4 years?
I like to minimize regret. Why not buy one of each?
Don't assume I know what I'm talking about.
Re: Ally CDs rates going up within 4 years?
I expected to want some of the money before the 5 years were up, but not all at once. It wasn't a problem buying a bunch of them at once. Now whenever I need some cash I can just close one or more, taking the penalty only on the one(s) I close.The reason you bought 8, as opposed to one, was (fill in the blank).
High risk does not equal high reward. It equals high risk of no reward.
Re: Ally CDs rates going up within 4 years?
I was already thinking of doing two CDs of 5K or 6K each so we'd only have to break one if we need any of the money.
Based on a prior post I've been reading the wiki on ibonds and the TD site and leaning that way. 2.20% currently and a guess would be that it won't go down much.
As this would be the longest term for part of our emergency funds I'd doubt we'd need the money anytime soon. We have $20K plus interent in a CD at Ally maturing in November that (as of now) we'll want to reinvest in a CD(s).
Based on a prior post I've been reading the wiki on ibonds and the TD site and leaning that way. 2.20% currently and a guess would be that it won't go down much.
As this would be the longest term for part of our emergency funds I'd doubt we'd need the money anytime soon. We have $20K plus interent in a CD at Ally maturing in November that (as of now) we'll want to reinvest in a CD(s).
Re: Ally CDs rates going up within 4 years?
First nothing states you would have to take out a single 100k CD. I have 25 $1000 CD at Ally. They don't have a limit on how many you can take out. It just means I get thick envelopes in the mail with 25 statements. Ally has also stated if they were to change their CD policy regarding early withdrawal they would notify all customers in advance so it should never be a surprise. I plan to buy more $1000 CD to expand my EF over time. Given the interest penalty is only 60 days I feel it has more liquidity than I bonds that cannot be touched for 1 year.
Re: Ally CDs rates going up within 4 years?
In march I put half my cash in "raise your rate" cd and half in traditional cd.
Re: Ally CDs rates going up within 4 years?
OK, I yield. Point made. You win. Eight CDs. Or 100.
Like the concept of a really thick envelope, or 100 envelopes. Neighbors (not to mention the mailman) will assume great wealth.
Like the concept of a really thick envelope, or 100 envelopes. Neighbors (not to mention the mailman) will assume great wealth.
Last edited by john94549 on Sat Jul 07, 2012 10:17 pm, edited 1 time in total.
Re: Ally CDs rates going up within 4 years?
I am in the "it doesn't make sense to have anything other than a 5 yr w/ them" camp right now. I am assuming rates will go up in the 5 yr period, but that it will make sense to close some of the CDs at that point rather than use the Raise Your Rate feature...
- Grandpaboys
- Posts: 878
- Joined: Sun Mar 04, 2007 8:16 am
- Location: Texas
Re: Ally CDs rates going up within 4 years?
"Ally differs from other institutions, where partial CD withdrawals are permitted, and the EWP applies only to funds withdrawn. This is often buried in the "fine print" of CD disclosures."
I contacted Ally with the above statement and was told Ally DOES NOT ALLOW partial withdrawals.
I contacted Ally with the above statement and was told Ally DOES NOT ALLOW partial withdrawals.
Good Day |
GP
Re: Ally CDs rates going up within 4 years?
I wonder if Ally will find some way to avoid letting you bump up the 4 year CD rate.
What if they don't ever offer any higher rates on 4 year CDs, but only on 3 an 5 year CDs?
What if they just stop issuing 4 year CDs?
It seems to me there are too many ways for them to avoid ever letting anyone actually bump up the rate.
What if they don't ever offer any higher rates on 4 year CDs, but only on 3 an 5 year CDs?
What if they just stop issuing 4 year CDs?
It seems to me there are too many ways for them to avoid ever letting anyone actually bump up the rate.
. |
The most important thing you should know about me is that I am not an expert.
Re: Ally CDs rates going up within 4 years?
Rates may go up, but when? And by how much? Japan has had ridiculously low rates for over a decade. The USA's rates have been low for a few years. I'd guess rates could be held low for at least several year longer minimum. They may only be put up marginally too.
Re: Ally CDs rates going up within 4 years?
Which is what I thought I said. Ally differs from other institutions. Other institutions offer partial withdrawals. Ally does not. This might explain their EWP.Grandpaboys wrote:"Ally differs from other institutions, where partial CD withdrawals are permitted, and the EWP applies only to funds withdrawn. This is often buried in the "fine print" of CD disclosures."
I contacted Ally with the above statement and was told Ally DOES NOT ALLOW partial withdrawals.
- Grandpaboys
- Posts: 878
- Joined: Sun Mar 04, 2007 8:16 am
- Location: Texas
Re: Ally CDs rates going up within 4 years?
Sorry John, I misunderstood what you said, however I am not aware of any BANKS offering partial withdraws. Can you name a few.
Thanks
Thanks
Good Day |
GP
Re: Ally CDs rates going up within 4 years?
If you are looking at a 4+ year horizon, why not go with an I-Bond? I=Bonds are inflation-protected, and offer no penalties for withdrawals after five years (and only three month's earnings after one year. Other pros from an article on Motley Fool:
* I Bonds are backed by the full faith and credit of the U.S. government.
* They can be bought from most financial institutions, including TreasuryDirect.
* The earnings are exempt from state and local taxes, and can be tax-free if used for post-secondary education expenses.
* Taxes on earnings can be deferred for up to 30 years.
* I Bonds are backed by the full faith and credit of the U.S. government.
* They can be bought from most financial institutions, including TreasuryDirect.
* The earnings are exempt from state and local taxes, and can be tax-free if used for post-secondary education expenses.
* Taxes on earnings can be deferred for up to 30 years.
Re: Ally CDs rates going up within 4 years?
I agree. I wouldn't place so much faith in those "bump up your rate" gimmicks. Just because interest rates rise, that doesn't mean Ally (or any other bank) has to jack up their rates. (of course, they may lose a few customers, too.)tc101 wrote:I wonder if Ally will find some way to avoid letting you bump up the 4 year CD rate. It seems to me there are too many ways for them to avoid ever letting anyone actually bump up the rate.
Re: Ally CDs rates going up within 4 years?
USAA does. StateFarmBank does. PenFed does (not a bank, but close).Grandpaboys wrote:Sorry John, I misunderstood what you said, however I am not aware of any BANKS offering partial withdraws. Can you name a few.
Thanks
Actually, PenFed, StateFarmBank and NWFCU allow partial IRA CD withdrawals without penalty (the EWP) in their IRA CDs. The only requirement is that you be 59 1/2 or older, and keep the minimum for a CD in your balance. PenFed's 7-year IRA CD at 2.4% is the best around with these privileges.* StateFarm's rates aren't so hot lately. I have no money at NorthWest Federal, so cannot comment aside from their disclosure statement. If I were going to harvest these days, I'd look at rates and EWPs, the general rule being "harvest low-hanging fruit".
*Think of it as a totally-liquid savings account paying 2.4%. NCUA-insured. Compared to your garden-variety NCUA-insured savings account, yielding 0.8%. Any senior with funds in an IRA should explore this option.
-
- Posts: 4
- Joined: Sun Jul 08, 2012 8:32 pm
Re: Ally CDs rates going up within 4 years?
It should be noted that, while Ally's current early withdrawal penalty is comparatively lenient, there is no guarantee that it will remain so.
Re: Ally CDs rates going up within 4 years?
Thanks everyone for your replies. Right now I'm going to be rereading the ibond wiki and Treasurydirect information. It's a bit confusing for me but as I understand it if we're holding 5 years or more we should come out ahead against a CD?
Thanks,
Jeremy
Thanks,
Jeremy
Re: Ally CDs rates going up within 4 years?
Yes, and probably everything will be not what we are expecting. I stopped predicting long time ago and guess what? There isn't the end of the world yet.Taylor Larimore wrote:Hi Jeremy:
I'm not that "insightful." I know what I don't know.I'm curious what the insightful people here think the chances are of rates going up.
Best wishes.
Taylor
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
Re: Ally CDs rates going up within 4 years?
I doubt you'd have to wait 5 years for an I-Bond to be ahead of a CD. Current rate is 2.20% until October 31, 2012. Just keep in mind, you cannot touch the money for the first 12 months. For year 1 through 5, you will pay a 3 month interest penalty (doubt you'll find a CD with a better early withdraw). You are also limited to how much you can put towards I-Bonds each year.JeremyM wrote:Thanks everyone for your replies. Right now I'm going to be rereading the ibond wiki and Treasurydirect information. It's a bit confusing for me but as I understand it if we're holding 5 years or more we should come out ahead against a CD?
Thanks,
Jeremy
But on the positive side:
- Taxes on earnings is tax deferred
- Earnings are exempt from stat and local taxes
- Can be redeemed in intervals of $25
- Tax free if used for qualifying post-secondary education expenses
Re: Ally CDs rates going up within 4 years?
So I if we had, say a $5K ibond and needed $1K we could take that out and leave the rest?- Can be redeemed in intervals of $25
Tax deferred would be the same as a CD, correct? That is, for federal purposes a CD kept 5 years and a ibond cashed in at 5 years would both be taxed on interest at the 5 year mark?
My concern after rereading the wiki several times is the rate changed in May and November going way down, to below CD rates in the future. I guess we could always take the 3 month penalty (guessing it would have to be very low in this senerio) and then put the money in a CD. As this would be the "last" 30% of our emergency fund we hopefully wouldn't be touching it for quite a while unless interest rate wise it because a much worse deal for a long term.
Jeremy
- nisiprius
- Advisory Board
- Posts: 52211
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: Ally CDs rates going up within 4 years?
The question I'd ask is this. If you are currently feeling anxious because of difficulty deciding between the straight CD and the bump rate CD, aren't you also going to feel equally anxious when the time comes to decide when or whether to bump the rate?
If rates start rising, aren't you likely to dither and dawdle because of fear that you'll bump too soon and the rates will go higher?
If rates start rising, aren't you likely to dither and dawdle because of fear that you'll bump too soon and the rates will go higher?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Ally CDs rates going up within 4 years?
That's an excellent point.nisiprius wrote:The question I'd ask is this. If you are currently feeling anxious because of difficulty deciding between the straight CD and the bump rate CD, aren't you also going to feel equally anxious when the time comes to decide when or whether to bump the rate?
If rates start rising, aren't you likely to dither and dawdle because of fear that you'll bump too soon and the rates will go higher?
Personally, I would have a great deal of difficulty deciding when exactly to pull the trigger on that. I am perpetually at risk of analysis paralysis.
Don't assume I know what I'm talking about.
-
- Posts: 7502
- Joined: Mon Dec 17, 2007 6:32 pm
Re: Ally CDs rates going up within 4 years?
No, CDs will credit your interest at some interval for reinvestment purposes. You will receive a 1099 each year for the interest. From IRS Pub 17:JeremyM wrote:Tax deferred would be the same as a CD, correct? That is, for federal purposes a CD kept 5 years and a ibond cashed in at 5 years would both be taxed on interest at the 5 year mark?
http://www.irs.gov/publications/p17/ch07.htmlCertificates of deposit (CDs). If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID.
Brian
Re: Ally CDs rates going up within 4 years?
I suspect "bump up" CDs already have future rate expectations built-in, as it were. It's a "win-win" for them, a "lose-lose" for you. I prefer to obey the ladder. When a CD is about to mature, I shop for the best, and avoid heart arrest.