CD Maturing- what are my options?

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anhonymous
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CD Maturing- what are my options?

Post by anhonymous »

So my CD matures in 2 wks and the new rate if I decide to re-invest in a CD again is 0.5% at the current bank. I see slightly better rates at Ally’s and Marcus so that is an option but what else are you doing if your CDs are maturing in this era of low interest.
7eight9
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Re: CD Maturing- what are my options?

Post by 7eight9 »

It may or may not be a good option for you but multi-year guaranteed annuities would be worth a look.

Multi-Year Guarantee Annuities (MYGAs) are also called fixed-rate annuities and are a specific annuity product type that functions similarly to a CD (Certificate of Deposit).
Both MYGAs and CDs contractually guarantee an annual interest rate for a specified period, have no annual fees and are fully principal protected.

Read more at --- https://www.stantheannuityman.com/myga-rates
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Kevin M
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Re: CD Maturing- what are my options?

Post by Kevin M »

CD pickings are pretty slim these days. To get the best rate, you probably will have to join a credit union. A good source for the best CD rates is DepositAccounts. I see top rates for 1-year CD in the 1% ballpark.

Kevin
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dbr
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Re: CD Maturing- what are my options?

Post by dbr »

In my portfolio of stocks and bonds I don't use CDs but rather diverse intermediate duration bond funds that together with the stocks are held for the long run. I don't pay any attention to what individual investments might yield or return in the short run.

If this is dedicated money that needs to be held for a specific short (around one to a few years) period of time probably the CDs that are available are going to be it.

I don't know enough about MGYAs to say one way or the other.
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Stinky
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Re: CD Maturing- what are my options?

Post by Stinky »

7eight9 wrote: Tue Oct 06, 2020 6:19 pm It may or may not be a good option for you but multi-year guaranteed annuities would be worth a look.

Multi-Year Guarantee Annuities (MYGAs) are also called fixed-rate annuities and are a specific annuity product type that functions similarly to a CD (Certificate of Deposit).
Both MYGAs and CDs contractually guarantee an annual interest rate for a specified period, have no annual fees and are fully principal protected.

Read more at --- https://www.stantheannuityman.com/myga-rates
Anhonymous, I recently purchased several MYGAs from blueprintincome.com

There have been some recent threads about MYGAs. Post back if you’d like more info.
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anon_investor
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Re: CD Maturing- what are my options?

Post by anon_investor »

How much money is this? Series I Savings Bonds might be an option.
phxjcc
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Re: CD Maturing- what are my options?

Post by phxjcc »

Synchrony HYS is 0.65%

Not a bad parking spot.
ivgrivchuck
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Re: CD Maturing- what are my options?

Post by ivgrivchuck »

I'm going for I-bonds and EE-bonds, but my portfolio is only mid 6-figures with 20% bond allocation.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
ivgrivchuck
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Re: CD Maturing- what are my options?

Post by ivgrivchuck »

dbr wrote: Tue Oct 06, 2020 6:41 pm In my portfolio of stocks and bonds I don't use CDs but rather diverse intermediate duration bond funds that together with the stocks are held for the long run. I don't pay any attention to what individual investments might yield or return in the short run.
I'm strongly against market timing, but if you have an investment yielding near zero, and keeping the investment includes risk (in this case both credit risk and one-sided duration risk), I just don't see the point.

Rates stay near zero, you get nothing; rates go up you lose money. It's a lose-lose investment.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
Old Sage(brush)
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Re: CD Maturing- what are my options?

Post by Old Sage(brush) »

I'm strongly against market timing, but if you have an investment yielding near zero, and keeping the investment includes risk (in this case both credit risk and one-sided duration risk), I just don't see the point.

Rates stay near zero, you get nothing; rates go up you lose money. It's a lose-lose investment.
So does this comment suggest that there is no point to holding intermediate bond funds? Or just not for money that would otherwise go into a "safe" CD type investment? I don't get it.
jimkinny
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Re: CD Maturing- what are my options?

Post by jimkinny »

There is very little attractive about the yield on fixed income right now. I would bide my time and hope for better days. I would also stick with CDs in the the shorter range because you can't get much extra yield for the extra term risk of a 5 year CD.
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Re: CD Maturing- what are my options?

Post by MikeG62 »

Kevin M wrote: Tue Oct 06, 2020 6:21 pm CD pickings are pretty slim these days. To get the best rate, you probably will have to join a credit union. A good source for the best CD rates is DepositAccounts. I see top rates for 1-year CD in the 1% ballpark.

Kevin
^This.

OP, be patient and keep checking. You might find something unique (possibly available only to people who live in the geographic area where you yourself live). I've had success finding some attractive opportunities using the DA site. But I admit, the pickings have gotten slimmer and slimmer and slimmer.

One option could be Barksdale Federal CU if you have an immediate family member who at one time was in the US armed forces.
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anhonymous
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Re: CD Maturing- what are my options?

Post by anhonymous »

Stinky: I just searched for MYGAs. Interesting instrument, did not know anything about it until you and couple others quoted here. Thank you all.

Yes I have been searching on that CD deposit site fairly regularly. Right now 0.9-1% seems to be the top rate.

One question on MYGAs- In the thread that I looked up pasted below, the OP has put this in an IRA. Can I do it o/s of an IRA, just like a CD?

Also I see for today the difference between A- and A rating is almost 0.7%. Is the increase in risk substantial to go to A-? I know this is personal but feedback on insurance risk ratings will help., Has an A- insurer gone belly up in the past?

Good MYGA thread:
viewtopic.php?f=1&t=313935&start=50
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Stinky
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Re: CD Maturing- what are my options?

Post by Stinky »

anhonymous wrote: Wed Oct 07, 2020 11:34 am Stinky: I just searched for MYGAs. Interesting instrument, did not know anything about it until you and couple others quoted here. Thank you all.

Yes I have been searching on that CD deposit site fairly regularly. Right now 0.9-1% seems to be the top rate.

One question on MYGAs- In the thread that I looked up pasted below, the OP has put this in an IRA. Can I do it o/s of an IRA, just like a CD?

Also I see for today the difference between A- and A rating is almost 0.7%. Is the increase in risk substantial to go to A-? I know this is personal but feedback on insurance risk ratings will help., Has an A- insurer gone belly up in the past?

Good MYGA thread:
viewtopic.php?f=1&t=313935&start=50
Yes, you can buy a MYGA outside of an IRA. The same tax rules will apply as to any other deferred annuity - taxable income reporting is deferred until money is withdrawn, you can further defer the taxable income by doing a 1035 exchange to another deferred annuity, and there is a 10% tax penalty if you take a distribution prior to age 59.5.

There have been companies rated A- by AM Best that went insolvent in the past. If you go back to the "junk bond crisis" of the late 1980s and early 1990s, you'll see a number of large life insurers, most notably Executive Life, First Capital, Fidelity Bankers, and Mutual Benefit, that went insolvent. Those large insolvencies caused the state regulators to significantly increase regulation, including the introduction of a system of "risk-based capital" that set out explicit requirements to hold more capital if the risks of the company are higher. The regulators continue to tighten the regulations to this date.

I don't recall any large life insurers that went insolvent in the 2000 or 2008 financial crises, nor in the 2020 pandemic crisis. That's no guarantee that there won't be insolvencies in the future. But I would feel comfortable buying a MYGA from a company with a rating of A-, and I have done that.
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dratkinson
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Re: CD Maturing- what are my options?

Post by dratkinson »

Low CD rollover rate, what to do? Been there, done that.


Decided to change direction and use muni bond funds.

Since dividends are the major component of bond fund total return, I use Vanguard's LT national (VWLTX) and an IT single-state muni fund mixed 50/50.

Risk and reward are related... can't have one without the other. Longer durations and single-state munis are more risky than shorter duration national munis.

My short experience with increasing muni risk/reward suggests...
--Increased rewards (dividends) are typically stable.
--Increased risk (NAV decline) is typically infrequent... and can be tax-loss harvested.

I TLHed both munis in 2018.

Once you've TLHed shares, it requires a much greater decline to do so again. Since bond fund prices tend not to appreciate, I may not get the chance to do so again with my old shares. (New shares are different story.)

Since bonds can lose 5-15% during a crash, can overfill bonds to ~120% (=1/(1-.15)) of anticipated need, to reduce that worry.

Have been doing this since 2015. So far so good.

N.B. Your munis in taxable can now perform multiple duties: extended-tier EF, home projects, new car, dry powder, and retirement bonds*.

* Retirement bonds. Since you now have some retirement bonds in taxable, you can skew your tax advantaged accounts toward equities for increased tax-sheltered growth.


Another option to reduce FOMO (fear of missing out)---worry about leaving money on the table...

Use the "ABP by CC"* technique to earn ~2%/yr tax-free on 1yr of living expenses kept in low-interest bank/CU accounts---your 1st-tier emergency funds. (* Search forum.)



So your new situation becomes:
--1st-tier EFs (insured bank/CU accounts) earning ~2%/yr tax-free by using ABP by CC technique.
--2nd-tier EFs (higher risk/reward munis in taxable) earning market return.
--Other investments skewed toward equities for increased growth.


Or you could allow your CD to rollover at 0.5%.

When I was faced with a similar decision, the rollover path was more onerus than using higher risk/reward munis.

Your choice.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
ivgrivchuck
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Re: CD Maturing- what are my options?

Post by ivgrivchuck »

Old Sage(brush) wrote: Wed Oct 07, 2020 6:41 am So does this comment suggest that there is no point to holding intermediate bond funds?
When interest rates get close enough to zero, holding an intermediate or a long term bond fund can never be profitable (compared to holding cash).

When interest rates raise intermediate and long term funds lose value. While cash (CDs, savings, money market funds) retains its absolute value.
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hudson
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Re: CD Maturing- what are my options?

Post by hudson »

MikeG62 wrote: Wed Oct 07, 2020 8:42 am
Kevin M wrote: Tue Oct 06, 2020 6:21 pm CD pickings are pretty slim these days. To get the best rate, you probably will have to join a credit union. A good source for the best CD rates is DepositAccounts. I see top rates for 1-year CD in the 1% ballpark.

Kevin
^This.

OP, be patient and keep checking. You might find something unique (possibly available only to people who live in the geographic area where you yourself live). I've had success finding some attractive opportunities using the DA site. But I admit, the pickings have gotten slimmer and slimmer and slimmer.

One option could be Barksdale Federal CU if you have an immediate family member who at one time was in the US armed forces.
Thanks MikeG62!
If I had a CD maturing in 2 weeks, I would skip the insurance products, as they aren't nearly as safe as FDIC/NCUA CDs, and go for the best available 5 year CD. I would investigate the early withdrawal penalty. It looks like Barksdale FCU is paying 1.7% for 5 years. Why not go shorter? It's an uneducated and speculative bet. Best available 5 year CDs have worked over the last 10 years. Will it continue to be a good strategy? Nobody knows.
eldinerocheapo
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Re: CD Maturing- what are my options?

Post by eldinerocheapo »

I feel and share everyone's pain on this. I've got nearly one CD per month for the next two years maturing. What to do? I've decided to quit taking Tira distributions and start paying monthly fixed expenses for the rest of the year with cash from maturing cd's. This will allow SS to increase annually before I begin to draw on it. Next, I'll max out our Roth IRAS in January 2021, and then pre pay estimated taxes on a $40k conversion from tira to Roth with this same cash. In the new year, I'll begin taking small tira distributions while using comparable amounts of this cash as a supplement to monthly fixed expenses.

Finally, we'll continue to fund our grandchildren's 529 college funds, as they have their whole lives ahead of them, and then go play some more bad golf on any cheap course that hasn't thrown me off already. Fore!
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backpacker61
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Re: CD Maturing- what are my options?

Post by backpacker61 »

I don't use CD's personally, but if I did, I would use my brokerage account and look at CD's on the secondary market.

These often are CD's that were owned by someone that deceased, and the executor of their estate needs to liquidate the CD's in order to provide assets to fund all the beneficiaries. The duration of these will often be "odd" (not 6 month, 1 year, 2 year, etc; just whatever is remaining on the existing CD). You can help both your self and the families involved by purchasing their CD's (which will be selling for a discount).

https://investor.vanguard.com/investing ... ary-market

If I "did" CD's, that is what I would "do".
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MikeG62
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Re: CD Maturing- what are my options?

Post by MikeG62 »

hudson wrote: Thu Oct 08, 2020 5:33 am
MikeG62 wrote: Wed Oct 07, 2020 8:42 am
Kevin M wrote: Tue Oct 06, 2020 6:21 pm CD pickings are pretty slim these days. To get the best rate, you probably will have to join a credit union. A good source for the best CD rates is DepositAccounts. I see top rates for 1-year CD in the 1% ballpark.

Kevin
^This.

OP, be patient and keep checking. You might find something unique (possibly available only to people who live in the geographic area where you yourself live). I've had success finding some attractive opportunities using the DA site. But I admit, the pickings have gotten slimmer and slimmer and slimmer.

One option could be Barksdale Federal CU if you have an immediate family member who at one time was in the US armed forces.
Thanks MikeG62!
If I had a CD maturing in 2 weeks, I would skip the insurance products, as they aren't nearly as safe as FDIC/NCUA CDs, and go for the best available 5 year CD. I would investigate the early withdrawal penalty. It looks like Barksdale FCU is paying 1.7% for 5 years. Why not go shorter? It's an uneducated and speculative bet. Best available 5 year CDs have worked over the last 10 years. Will it continue to be a good strategy? Nobody knows.
Could built a 5-year ladder of "plus point" CD's at Barksdale to avoid betting on whether a longer-term (5-year) or shorter-term (1-year) CD is better (i.e., spread reinvestment risk). Their "plus point" CD's also pay 10bps more than their regular CD's, but do require one to open a 5-year ladder. Having said that, each rung of the ladder has a minimum investment of only $1,000. So you could weigh each rung of the ladder however you want. FWIW, I opened two 5-year ladders back in late August (one taxable and one tax deferred/IRA). Taxable ladder had $1,000 in 12-month rung and then $150,000 spread equally across the other rungs. Tax deferred had $1,000 in each of the first three (12, 24 and 36-month) rungs with ~$220,000 spread roughly equally between the last two rungs. For full disclosure, rates were 30bps higher (for each rung) when I opened mine. I was able to open and fund the taxable CD's within 24 hours and the tax deferred within 3-days. EWP is 90 days for CD's with a term of 12 months or less and 180 days for all other CD's. I got in because my Dad was honorably discharged from the military ~60 years ago.
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anhonymous
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Re: CD Maturing- what are my options?

Post by anhonymous »

One option could be Barksdale Federal CU if you have an immediate family member who at one time was in the US armed forces.
[/quote]

They have some great rates there, but I am not eligible unfortunately.

Thanks everyone for chiming along. I have for sure learned of some new options here - MYGA's, secondary market CD's, muni bond funds (this I knew but I was eschewing it), so will look into it. If there are other ideas pls keep them coming.
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Kevin M
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Re: CD Maturing- what are my options?

Post by Kevin M »

backpacker61 wrote: Thu Oct 08, 2020 6:36 am I don't use CD's personally, but if I did, I would use my brokerage account and look at CD's on the secondary market.

These often are CD's that were owned by someone that deceased, and the executor of their estate needs to liquidate the CD's in order to provide assets to fund all the beneficiaries. The duration of these will often be "odd" (not 6 month, 1 year, 2 year, etc; just whatever is remaining on the existing CD). You can help both your self and the families involved by purchasing their CD's (which will be selling for a discount).

https://investor.vanguard.com/investing ... ary-market

If I "did" CD's, that is what I would "do".
Yields on brokered CDs currently are about the same as yields on Treasuries; e.g., 5-year at 0.35%--much lower than direct CDs.

Sometimes you can find something marginally better on the secondary market (I've bought many in the past, when yields were competitive with direct CDs), but be sure to consider the commission, which lowers the net yield. A $1 per CD ($1,000 face value) commission lowers net yield on a 1-year CD by about 0.1%.

Kevin
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Chicken Little
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Re: CD Maturing- what are my options?

Post by Chicken Little »

When my last CD expired, I finally capitulated and started a small-cap-value biotechnology fund.

Not joking.

My intention was to walk into Big Bank and just renew it at the virtually zero rate, but they were clearly going to have me declared as potentially harmful to myself or others, so I walked with the money and took a position in a company I had been watching for a few years. This is the first individual stock that I've owned in well over 15 years.

Naturally, the worst possible thing happened...it doubled. Now I have three positions (all in still <1% of total, but you know how it goes).

The things they make us do, them and their ginned up markets...

Backsliding
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alpenglow
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Re: CD Maturing- what are my options?

Post by alpenglow »

backpacker61 wrote: Thu Oct 08, 2020 6:36 am I don't use CD's personally, but if I did, I would use my brokerage account and look at CD's on the secondary market.

These often are CD's that were owned by someone that deceased, and the executor of their estate needs to liquidate the CD's in order to provide assets to fund all the beneficiaries. The duration of these will often be "odd" (not 6 month, 1 year, 2 year, etc; just whatever is remaining on the existing CD). You can help both your self and the families involved by purchasing their CD's (which will be selling for a discount).

https://investor.vanguard.com/investing ... ary-market

If I "did" CD's, that is what I would "do".
These can be hard to nab (gotta be in the right place at the right time), but I've seen some deals here and there. In this market, I still wouldn't expect anything amazing.
Chicken Little
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Re: CD Maturing- what are my options?

Post by Chicken Little »

Update: just liquidated my small-cap-value-biotech fund and returned money to investors (me).

Up $20 in one position, $500 in the other (up $1500 in the original culprit, but that's an exception, holding for now). Just way to much I didn't know, and the science is the easy part. It would be a lot of work to keep up with the finances, patent law, and data releases. Just don't like being the dumb money. I mean, I can control the money part?

Back in the fold (with one little blemish left to resolve).
carminered2019
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Re: CD Maturing- what are my options?

Post by carminered2019 »

IMHO, just bite the bullet with almost ZERO return or yield for FI and overweight stock portion by 1 or 2% or pay off the mortgage is you still have one.
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dratkinson
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Re: CD Maturing- what are my options?

Post by dratkinson »

Chicken Little wrote: Thu Nov 19, 2020 12:39 pm Update: just liquidated my small-cap-value-biotech fund and returned money to investors (me).
...
Back in the fold (with one little blemish left to resolve).

After selling my last remaining stock, I had to look and it was up, so felt like a fool for selling early.

But after it was down a few months later, I felt like a genius for selling early.

I was able to stop checking the price after the market confirmed I was a genius for selling early to go with market indexing. :)
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