How to invest maturing CDs

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carolinaman
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How to invest maturing CDs

Post by carolinaman » Tue Oct 16, 2018 9:04 am

I had $108k of CDs (taxable) from a CU mature last week. I also have $135k of CDs (TIRA) that will mature from another CU in January. I have a 45/55 AA. I currently have CDs at 2 other CUs that are not due to mature for a couple of years. These CDs were great at the time of investment because I got 3% when interest rates were really low.

One of the things I dislike about scattering these CDs over so many CUs is the complexity, especially RMDs and taxes. My primary investment account is with Vanguard and I am inclined to put the money in Vanguard. I am leaning towards investing in VBILX (Vanguard Intermediate Bond) but open to other investment ideas. My thinking for VBILX is that it is well diversified among treasuries and investment grade corporates. The fact interest rates have increased to around 3.15% for 10 year treasuries gives me some comfort on interest rate risk. I have no idea what interest rates will do in short term but I am a long term investor and not overly concerned about a modest increase in rates.

Your thoughts?

RickBoglehead
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Re: How to invest maturing CDs

Post by RickBoglehead » Tue Oct 16, 2018 9:09 am

You can buy brokered CDs at Vanguard.

MikeG62
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Location: New Jersey

Re: How to invest maturing CDs

Post by MikeG62 » Tue Oct 16, 2018 10:46 am

You can also buy Treasuries at Vanguard (or Fidelity) as another option. You can build a treasury bond ladder too if you want.

VBILX has a weighted average maturity of ~7 years. You sure you want to extend the term out that far? What was the term of the CD's that are maturing.
Real Knowledge Comes Only From Experience

megabad
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Joined: Fri Jun 01, 2018 4:00 pm

Re: How to invest maturing CDs

Post by megabad » Tue Oct 16, 2018 2:18 pm

carolinaman wrote:
Tue Oct 16, 2018 9:04 am
I had $108k of CDs (taxable) from a CU mature last week. I also have $135k of CDs (TIRA) that will mature from another CU in January. I have a 45/55 AA. I currently have CDs at 2 other CUs that are not due to mature for a couple of years. These CDs were great at the time of investment because I got 3% when interest rates were really low.

One of the things I dislike about scattering these CDs over so many CUs is the complexity, especially RMDs and taxes. My primary investment account is with Vanguard and I am inclined to put the money in Vanguard. I am leaning towards investing in VBILX (Vanguard Intermediate Bond) but open to other investment ideas. My thinking for VBILX is that it is well diversified among treasuries and investment grade corporates. The fact interest rates have increased to around 3.15% for 10 year treasuries gives me some comfort on interest rate risk. I have no idea what interest rates will do in short term but I am a long term investor and not overly concerned about a modest increase in rates.

Your thoughts?
I agree with MikeG62 above, VBILX is a very different investment from CDs. You will want to consider whether the associated duration and credit risk fit your investment plan.

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GoldStar
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Re: How to invest maturing CDs

Post by GoldStar » Tue Oct 16, 2018 2:28 pm

If you want to put them back in CDs Ally is currently paying an extra 1% bonus on up to $100K (Discussed here: viewtopic.php?f=2&t=261504&newpost=4168884)

For instance, - if you put $100K in a 12 month CD you will get 2.5% plus an extra 1% ($1000) effectively getting a 3.5% rate on a 12 month CD. Seems a good deal. You might be able to get higher rates if you want to go for longer time periods.

drzzzzz
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Re: How to invest maturing CDs

Post by drzzzzz » Tue Oct 16, 2018 2:36 pm

Treasury bill ladder - easy to buy and depending on what time period you are looking at, pay as much or more than CDs right now

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vineviz
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Re: How to invest maturing CDs

Post by vineviz » Tue Oct 16, 2018 2:36 pm

carolinaman wrote:
Tue Oct 16, 2018 9:04 am

One of the things I dislike about scattering these CDs over so many CUs is the complexity, especially RMDs and taxes. My primary investment account is with Vanguard and I am inclined to put the money in Vanguard. I am leaning towards investing in VBILX (Vanguard Intermediate Bond) but open to other investment ideas.
The primary question you should answer is "when I do expect to spend the money?".

Whatever you expect to spend in the next 1 or 2 years should be in money markets or a bank account.

Whatever you expect to spend in 3-5 years should be in short-term bond funds.

Whatever you expect to spend in 5-12 years should be in intermediate-term bond funds.

Anything that isn't likely to be spent in the next 12 years should be in stocks or long-term bonds.

In other words, your time horizon will dictate the best investment allocation.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

carolinaman
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Location: North Carolina

Re: How to invest maturing CDs

Post by carolinaman » Tue Oct 16, 2018 3:23 pm

Thanks for everyone's replies so far.

I should have been more clear. This is long term money. I am not overly concerned about some fluctuation in interest rates. I have CDs in 4 different CUs. I would like to simplify and consolidate that for taxes, RMDs and administration of these funds..

The reason our money was in these CDs is because interest rates were really low in past 3 to 5 years, usually 2% or less. This resulted in a pretty dim outlook for bond funds. 3% CDs for terms of 3 to 5 years were really attractive then. The 10 yr treasury is 3.14% today which makes bond funds more feasible, but not necessarily the best option. Hence my question. Thanks

feh
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Re: How to invest maturing CDs

Post by feh » Tue Oct 16, 2018 3:24 pm

If the money is long term, I suggest total bond.

SpideyIndexer
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Re: How to invest maturing CDs

Post by SpideyIndexer » Tue Oct 16, 2018 9:08 pm

The answer may depend on how much having CDs covered by FDIC helps you sleep at night. The brokered CDs at Vanguard get full insurance up to FDIC limits at each bank. And the rates are good, so you get the best of both worlds.

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