CD ladder setup with Merrill ??

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ndnboy
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CD ladder setup with Merrill ??

Post by ndnboy » Fri May 18, 2018 9:38 am

Funded new Merrill act and Im ready to setup 3 yr CD ladder for some of our fixed income.

How does this look for non callable options?
also, what is the coupon frequency referring to?

ALLY BANK 246000 2.900% SemiAnnually 05/24/2021 2.9 Non-Callable
ALLY BANK 246000 2.750% SemiAnnually 05/26/2020 2.75 Non-Callable
BERKSHIRE BANK 246000 2.450% SemiAnnually 05/26/2020 2.45 Non-Callable


Thx

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Tyler Aspect
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Re: CD ladder setup with Merrill ??

Post by Tyler Aspect » Fri May 18, 2018 11:21 am

It is less tax efficient to hold taxable fixed income when you can hold them within your TSP accounts. G fund is a great choice for fixed income; possibly 75% G, 25% C. You do not appear to have any international stocks, so take a look at FTSE Developed Markets ETF (VEA).
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lack_ey
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Re: CD ladder setup with Merrill ??

Post by lack_ey » Fri May 18, 2018 12:25 pm

Coupon is your interest payment. They usually are semiannual (twice a year), like many bonds. Sometimes not. So a $1,000 par CD with coupon of 2.9% semiannually would pay out $14.50 twice a year.

Merrill Edge doesn't typically have a great selection available through the platform, and it's mostly new issue. You'd find a bit higher rates elsewhere.

The rates you're quoting there are all less than 0.2% better than Treasuries of equivalent maturities so I don't think I'd bother. Treasuries are state tax free, unlike CDs, and are much more liquid if you need to sell early.

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Earl Lemongrab
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Re: CD ladder setup with Merrill ??

Post by Earl Lemongrab » Fri May 18, 2018 1:11 pm

Yeah, the G Fund is at 2.875% this month, so it compares favorably to the CDs you mention. Now, the G rate isn't fixed for longer than the month, but I wouldn't expect it to go down soon.

For me, fixed income in tax-advantaged, stocks in taxable. At Edge you could be getting some free ETFs.
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ndnboy
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Re: CD ladder setup with Merrill ??

Post by ndnboy » Fri May 18, 2018 3:37 pm

lack_ey wrote:
Fri May 18, 2018 12:25 pm
Coupon is your interest payment. They usually are semiannual (twice a year), like many bonds. Sometimes not. So a $1,000 par CD with coupon of 2.9% semiannually would pay out $14.50 twice a year.

Merrill Edge doesn't typically have a great selection available through the platform, and it's mostly new issue. You'd find a bit higher rates elsewhere.

The rates you're quoting there are all less than 0.2% better than Treasuries of equivalent maturities so I don't think I'd bother. Treasuries are state tax free, unlike CDs, and are much more liquid if you need to sell early.
Earl Lemongrab wrote:
Fri May 18, 2018 1:11 pm
Yeah, the G Fund is at 2.875% this month, so it compares favorably to the CDs you mention. Now, the G rate isn't fixed for longer than the month, but I wouldn't expect it to go down soon.

For me, fixed income in tax-advantaged, stocks in taxable. At Edge you could be getting some free ETFs.
Tyler Aspect wrote:
Fri May 18, 2018 11:21 am
It is less tax efficient to hold taxable fixed income when you can hold them within your TSP accounts. G fund is a great choice for fixed income; possibly 75% G, 25% C. You do not appear to have any international stocks, so take a look at FTSE Developed Markets ETF (VEA).
Thanks for all the input. Guess I still have a lot to learn. Recently made changes to AA and added 25% Bonds into our TSP. The CD money would be about 5% of AA with remaining 75% in stocks, new 401K/TSP contributions would help grow bond exposure.

My thinking with CDs was to have a larger pool of income to draw from in an emergency or market downturn. Our EF in the past was close to 5%, we thought we would drop that to 2.5ish and carry a new 5% in the CDs. Didnt think to look at the CDs like we recently did in learning bonds are better off in tax defferred acts. BTW, Merrill act is link to bank act and comes with added benefits by holding a balance of assets there.

So what to do now:

1- Do I carry all of our bond, fixed options in the TSP? Leaving EF as the only cash option outside of tax defferred act?
2- Use unallocated money outside of TSP strictly to buy ETFs? Like the recent VTI purchase and possible foreign exposure.

Was trying to have the money that was just sitting at bank, earning close to 0%, work better for us. May have to consider placing the 5% in an online savings/MM act, and unallocated money applied to ETFs moving forward.

Thx

ndnboy
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Re: CD ladder setup with Merrill ??

Post by ndnboy » Mon May 21, 2018 8:13 am

If purchasing Treasuries vs CDs, do you have to purchase at Treasurydirect or can you do so at a Merrill?

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