PenFed 1.8 3 yr cd

[hoops777]

I was going back in forth with a bond expert in some emails.I told her that the high grade munis in a 10 year ladder are so bad that this 3 yr cd at 1.8 in an IRA was a much better option.She warned me that their has to be a catch in terms of being insured/guaranteed to have such a high yield.I have read some things on the web and a lot of people seem to hate PenFed because of their customer service and hassles.My main concern is are they worry free in terms of safety for our investments.Any PenFed bogleheads with some words of wisdom?

[fsrph]

I was going back in forth with a bond expert in some emails.I told her that the high grade munis in a 10 year ladder are so bad that this 3 yr cd at 1.8 in an IRA was a much better option.She warned me that their has to be a catch in terms of being insured/guaranteed to have such a high yield.I have read some things on the web and a lot of people seem to hate PenFed because of their customer service and hassles.My main concern is are they worry free in terms of safety for our investments.Any PenFed bogleheads with some words of wisdom?

I have some PenFed certificates. They are insured by the NCUA .... which is the agency that insures credit unions. The 1.8% rate is good in todays cd enviroment. Check the NCUA site for insurance coverage limits.
http://www.ncua.gov/Pages/default.aspx

Francis

[HueyLD]

I have read some things on the web and a lot of people seem to hate PenFed because of their customer service and hassles.My main concern is are they worry free in terms of safety for our investments.Any PenFed bogleheads with some words of wisdom?

I have had nothing but good customer service and no hassles. It is nice to have a safe place to invest my "safe" money and PenFed is allowing a small investor like me to earn decent returns on my money.

I had some minor issues with my PenFed credit card and it was not even PenFed's fault. The merchant didn't code the transaction properly and PenFed asked me to get an original copy from the merchant in order for PenFed to change the transaction code. I did that and PenFed corrected my reward points within 2 weeks.

Granted it's not perfect, but who is?

[crowd79]

What's the withdrawal penalty if cashed in early? I stick to banks with a 3m or less penalty.

[jtl46]

What's the withdrawal penalty if cashed in early? I stick to banks with a 3m or less penalty.

Good luck with that AND finding a decent rate. OBTW it is a 6 month penalty.

[SSSS]

Wow, PenFed's rates are really good right now.

Term Dividend Rate APY
6 Month 0.75% 0.75%**
1-Year 1.238% 1.25%
2-Year 1.583% 1.60%
3-Year 1.829% 1.85%
4-Year 1.830% 1.85%
5-Year 1.879% 1.90%
7-Year 1.980% 2.00%

I got a Penfed 4-year in September and it was only 1.5%

PenFed's 3-7 year CDs are almost as high as the current highest 10-year I could find (2% at Discover Bank).

[BrandonBogle]

I've been a PenFed member for many years and have had a number of products through them - savings, CDs, mortgage, auto loans, credit cards, etc. Nothing but goodness from them. And recently the 6% PenFed CDs in our family have recently come to maturity. We are also thinking strongly about using the 3 year or 4 year CD and live with the 6-mo penalty if we want to take anything out. I have a thread out here http://www.bogleheads.org/forum/viewtopic.php?f=1&t=109885 about helping to set up my mom's portfolio who had previously not been into investing. She is also a very big PenFed fan. In fact, I recently asked the question of whether this CD would be more worthwhile than some bonds for part of her holdings.

Specifically about VIPSX, I'm still reading up on how to "read" the numbers. The SEC Yield on that is currently negative. She asked me (and I told her I don't know) if any yield/appreciation of this holding would be a better return than the the 1.85% CD we have access to? The CD carries a 6-month interest penalty on it and we can get a multi-year term on it. I don't know enough to tell her NOT to go with the CD, but I think based on what I read so far that the TIPS are the better choice. With the CD, we are guaranteed not to keep up with inflation and isn't that exactly what TIPS are trying to accomplish?

[learning_head]

I recently asked similar questions and decided to go with that exact certificate...

Joining them and setup was fast and easy. Did everything online. I setup a savings account first and wired the money there first; then opened CDs online as soon as the money arrived. They did send me some CD papers in the mail after I already opened the CDs and I sent back the forms (not sure if that was absolutely necessary: CSR said no on the phone but when I asked via email they said I had to send back all the paperwork). I also had faxed them my signature card, but CD papers had to be sent my mail for some reason.

Anyway, I have no regrets so far and over many years I heard a lot of good things about them.

[Karl]

OBTW it is a 6 month penalty.

Positive side of low yields is the penalty ends up being really tiny.

[MikeRes]

All the PenFed CDs have a six month penalty for early withdrawal except for the seven year CD which has a 12 month penalty.
One of the things you can do to mitigate the penalty is to open multiple CDs at the time of purchase.
So, if you plan on purchasing $100k worth of CDs, simply purchase 10 $10k CDs.

Should you need to terminate early, just turn in CDs for the minimum amount you need to cash out.
If you decide to take a first class, six month trip around the world and need $30k, you need only cash in 3 $10k CDs; pay the six month ETP on those three CDs and preserve your interest on the remaining $70k.

Lastly I have had no trouble with PenFed CS.
I have used then for CDs, autoloans, HEL and I'm considering refinancing my 10-year mortgage with a 5/5 ARM at 2.625%.

The only problems I have heard of is with their Mortgage department being swamped with applications and therefore taking longer than desired to complete the processing.
I personaly have not experienced this.

[Langkawi]

All the PenFed CDs have a six month penalty for early withdrawal except for the seven year CD which has a 12 month penalty.

Actually, the 5 year Money Market Certificates have the same 365 day penalty as the 7 year Money Market Certificates. Been that way for a couple years and applies to new issues and rollovers.

[john94549]

On a PenFed IRA CD, there is no penalty for early withdrawal when (a) you are 59 1/2 or older and (b) the withdrawal is "partial". I discussed this in more detail in another thread.

[Browser]

Wow, PenFed's rates are really good right now.

Term Dividend Rate APY
6 Month 0.75% 0.75%**
1-Year 1.238% 1.25%
2-Year 1.583% 1.60%
3-Year 1.829% 1.85%
4-Year 1.830% 1.85%
5-Year 1.879% 1.90%
7-Year 1.980% 2.00%

I got a Penfed 4-year in September and it was only 1.5%

PenFed's 3-7 year CDs are almost as high as the current highest 10-year I could find (2% at Discover Bank).

I dunno. I got 2.5% on a 4-year CD at a local credit onion.

[empb]

I dunno. I got 2.5% on a 4-year CD at a local credit onion.

Bet the layers of fine print made you cry.

[learning_head]

I got 2.5% on a 4-year CD at a local credit onion.

Which one, if you don't mind sharing? And when did you open it? (around what date?)

[crowd79]

10 year CD at Discover for 2%. That is crazy long for such a small yield.....

[SSSS]

10 year CD at Discover for 2%. That is crazy long for such a small yield.....

10-year CDs are crap right now. I got a 3.25% from Discover in 2010, a 3.44% from iGoBanking in 2011, and a 2.5% from Discover in 2012. I was trying to slowly build a ladder of entirely 10-year CDs, but now it doesn't seem worth the trouble when the offerings are so poor.

[crowd79]

The doubling effect yield of 3.53% interest on an EE Bond when held for exactly 20 years is more attractive at this point. Tax deferred and state income tax-free. However a massive, massive penalty if cashed in early at 0.2% interest. Most suitable for long term investments (retirement income) or breaking them in the first 1-3 years (small 3m penalty and much less lost on opportunity cost)..

[Firewood42]

As I understand it the best part about a PenFed cd is if you are facing RMD, you can withdraw money for it with no penalty.

[HueyLD]

As I understand it the best part about a PenFed cd is if you are facing RMD, you can withdraw money for it with no penalty.

Yes provided that you only make partial withdrawals and that the requested withdrawal amount does not reduce the balance to below $1,000.

[docneil88]

Thanks SSSS & hoops777 for the info on Pentagon Federal Credit Union's excellent CD rates. If one is not a current member of the armed forces or a US government employee or a relative of one, here are some of the organizations you can join which will then allow you to join PenFed:

American Red Cross http://www.redcross.org/
Coast Guard Auxiliary Association http://cgauxa.org/
National Military Family Association http://www.militaryfamily.org/
Voices for America's Troops http://www.voicesfortroops.org/

Continuing membership renewal in one of these is not required to maintain your PenFed membership. More details on Pen Fed membership eligibility here: https://netmember4.penfed.org/NetMember ... ility.aspx .

Local credit unions are another alternative. Often they let local community members join, even if the name of the credit union seems to indicate some exclusivity re. membership. Here's a partial list of credit unions across the country with over $500 million in assets: http://www.crnrstone.com/experience/cli ... illion.php .

Re. the safety of credit unions vs. banks, I noticed this intriguing point of view at http://answers.yahoo.com/question/index ... 943AA1yu40
posted in 2009:

Your money might actually be safer in a credit union than in a bank, though it's a fine point of distinction.

NCUA is an agency of the federal government, just as the FDIC is. NCUA insures your accounts at credit unions to the same limits as FDIC does for banks.

The difference is that credit unions capitalize their insurance fund, and carry this as an asset on their books. That means they have a vested interest in keeping the insurance fund solvent. If one credit union takes unwarranted risks, it affects them all.

Also, credit unions are more tightly regulated than banks. They simply are not allowed to invest in many of the riskier securities that banks are.

My money is in a credit union.
Source(s):
Worked for all types of financial institutions since 1977.