New PenFed CD rates!

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Happy2BeFree

New PenFed CD rates!

Post by Happy2BeFree »

Because of all you awesome Bogleheads, I learned about PenFed (and bought several 3-yr CDs at 2%). I also learned of the rumor on Deposit Accounts about possible 3% 5-yr CDs coming Dec. 1, so one minute after midnight, I checked:

Term Dividend Rate APY
6 Month 0.300% 0.30%
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%
5-Year 3.000% 3.04%
7-Year 3.000% 3.04%

Woo-hoo!! Thanks again, Bogleheads!! You're the best!!
Ricola
Posts: 708
Joined: Sat Apr 26, 2008 10:38 am

Re: New PenFed CD rates!

Post by Ricola »

Note the early withdrawal penalties:

Certificates with a term of 5 years or greater;

(applies only to certificates issued or rolled over on 3/15/11 or later)

If redeemed within 365 days of the issue date or any renewal date, all dividends will be forfeited.

If redeemed thereafter, but before the maturity date, dividends for the most recent 365 days will be forfeited.
User avatar
sperry8
Posts: 2228
Joined: Sat Mar 29, 2008 9:25 pm
Location: Miami FL

Re: New PenFed CD rates!

Post by sperry8 »

Pretty decent 2 year rate. Might have to consider it.
BH contest results: 2019: #233 of 645 | 18: #150 of 493 | 17: #516 of 647 | 16: #121 of 610 | 15: #18 of 552 | 14: #225 of 503 | 13: #383 of 433 | 12: #366 of 410 | 11: #113 of 369 | 10: #53 of 282
goodenoughinvestor
Posts: 295
Joined: Fri Aug 09, 2013 10:33 am

Re: New PenFed CD rates!

Post by goodenoughinvestor »

Their new 4 year rate offers a slightly better 2-yr return after penalties (1.67 vs 1.52)
sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

Re: New PenFed CD rates!

Post by sscritic »

The last time I bought a 5 year CD, it paid 13%. Admittedly, inflation was very high, but inflation came down over the next 5 years, so the 13% looked better and better. Ask yourself this: do you expect inflation to fall over the next 5 years? If so, your 3% might be a pretty good deal.
lazyday
Posts: 3797
Joined: Wed Mar 14, 2007 10:27 pm

Re: New PenFed CD rates!

Post by lazyday »

sscritic,
Early withdrawal penalties are 6 or 12 months interest.
Not snark: Do you have a better alternative for fixed income?
Other than perhaps I bonds, which can't be bought in quantity.

Hey, is there a better word than "fixed income" for cash, bonds, CDs, etc? TIPS and I Bonds don't seem fixed to me, except in real return.
sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

Re: New PenFed CD rates!

Post by sscritic »

lazyday wrote:Do you have a better alternative for fixed income?
Not really. I just don't get excited and shout "Woo-hoo!!" when I discover the least worst of several bad choices.

[worst, worster, and worstest were my choices here: I chose worst as the least worst grammatically]
grok87
Posts: 9162
Joined: Tue Feb 27, 2007 9:00 pm

Re: New PenFed CD rates!

Post by grok87 »

Happy2BeFree wrote:Because of all you awesome Bogleheads, I learned about PenFed (and bought several 3-yr CDs at 2%). I also learned of the rumor on Deposit Accounts about possible 3% 5-yr CDs coming Dec. 1, so one minute after midnight, I checked:

Term Dividend Rate APY
6 Month 0.300% 0.30%
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%
5-Year 3.000% 3.04%
7-Year 3.000% 3.04%

Woo-hoo!! Thanks again, Bogleheads!! You're the best!!
good news- thanks for sharing.
RIP Mr. Bogle.
User avatar
stevewolfe
Posts: 1537
Joined: Fri Oct 10, 2008 7:07 pm

Re: New PenFed CD rates!

Post by stevewolfe »

Thanks for posting this. I personally *am* excited about this as I had a CD earning 2.6% mature a couple months ago and I dropped it in a 9 month no penalty CD hoping something better would come along and it just did... Dare I say 'woot'! :sharebeer
am
Posts: 3561
Joined: Sun Sep 30, 2007 9:55 am

Re: New PenFed CD rates!

Post by am »

Can you do the 5 year CD in an IRA?

If so, why would someone choose total bond over the CD for fixed income other than maybe having easier rebalancing? You could always open multiple CDs and rebalance out of them at a cost of 1 year interest.
goodenoughinvestor
Posts: 295
Joined: Fri Aug 09, 2013 10:33 am

Re: New PenFed CD rates!

Post by goodenoughinvestor »

am wrote:Can you do the 5 year CD in an IRA?

If so, why would someone choose total bond over the CD for fixed income other than maybe having easier rebalancing? You could always open multiple CDs and rebalance out of them at a cost of 1 year interest.
My thoughts exactly. I have been liquidating most of my bond funds, which have paid about .30 this past year, in favor of the Penfed 2% 3-year CD, which has a 6-month interest penalty. I'm happy to have the higher rate, but my primary reason for the shift is that CDs just seem less risky right now than bond funds, due to concerns about easing and interest rate spikes. I'm a new diy investor and have concluded that I want the fixed income portion of my portfolio to be extremely low risk. CDs offer that--and at the same time their rates are better than bond funds. 2% is not going to make me rich, but I sleep better at night not worrying that 2% could turn into -2%. In a couple of years, I'll revisit.
lazyday
Posts: 3797
Joined: Wed Mar 14, 2007 10:27 pm

Re: New PenFed CD rates!

Post by lazyday »

sscritic wrote:Not really. I just don't get excited and shout "Woo-hoo!!" when I discover the least worst of several bad choices.
Yeah, I guess I felt that way when people were excited about less low TIPS yields.

Still, for those buying large CDs, it may be worthy of a "squee" or two.
lazyday
Posts: 3797
Joined: Wed Mar 14, 2007 10:27 pm

Re: New PenFed CD rates!

Post by lazyday »

am wrote:(snip) , why would someone choose total bond over the CD
If interest rates fall quickly, bonds rise in value. So bonds might provide some protection against events like 2007 or 1929.

There's some threads or at least posts on CD vs bonds, but not sure how easy to find them.

My amateur opinion is that CDs with low early withdrawal penalties are much better today than taxable nominal bonds, for the individual investor.

EDIT: added "taxable"
thanks dratkinson
Last edited by lazyday on Sun Dec 01, 2013 11:54 am, edited 1 time in total.
User avatar
dratkinson
Posts: 5102
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: New PenFed CD rates!

Post by dratkinson »

My data point.

Had the last of my 4% CDs mature this month and rolled them over into TE bonds. Not too worried about NAV fluctuation.

Double checked Vanguard today:

VWIUX (IT TE), 2.40% SEC yield, 3.00% TEY (25% fed avoided, 5% state paid, 20% combined avoided).

VWLUX (LT TE), 3.48% Sec yield, 4.35% TEY (20% bracket).



Edit. Corrected error noted by marcwd.
Last edited by dratkinson on Mon Dec 02, 2013 9:54 pm, edited 1 time in total.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
Topic Author
Happy2BeFree

Re: New PenFed CD rates!

Post by Happy2BeFree »

Ricola wrote:Note the early withdrawal penalties:

Certificates with a term of 5 years or greater;

(applies only to certificates issued or rolled over on 3/15/11 or later)

If redeemed within 365 days of the issue date or any renewal date, all dividends will be forfeited.

If redeemed thereafter, but before the maturity date, dividends for the most recent 365 days will be forfeited.
Thanks, Ricola...note also that none of the penalties will eat into principal. I believe Kevin M has confirmed this in previous posts, and it's a really nice side benefit. :happy
Last edited by Happy2BeFree on Sun Dec 01, 2013 11:23 pm, edited 1 time in total.
User avatar
dm200
Posts: 23148
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: New PenFed CD rates!

Post by dm200 »

Yes - if the details of any penalty for early wd are important - note that for most (but not all) CDs/certificates issued by banks and credit unions, the early wd penalty may eat into the original principal. Read the "fine print".
Topic Author
Happy2BeFree

Re: New PenFed CD rates!

Post by Happy2BeFree »

goodenoughinvestor wrote:
am wrote:Can you do the 5 year CD in an IRA?

If so, why would someone choose total bond over the CD for fixed income other than maybe having easier rebalancing? You could always open multiple CDs and rebalance out of them at a cost of 1 year interest.
My thoughts exactly. I have been liquidating most of my bond funds, which have paid about .30 this past year, in favor of the Penfed 2% 3-year CD, which has a 6-month interest penalty. I'm happy to have the higher rate, but my primary reason for the shift is that CDs just seem less risky right now than bond funds, due to concerns about easing and interest rate spikes. I'm a new diy investor and have concluded that I want the fixed income portion of my portfolio to be extremely low risk. CDs offer that--and at the same time their rates are better than bond funds. 2% is not going to make me rich, but I sleep better at night not worrying that 2% could turn into -2%. In a couple of years, I'll revisit.

Yes, you can do IRA CDs as well (including inherited IRAs). I've been going back and forth between Total Bond and CD due to ease of rebalancing...but that 3% has surely tipped the scales!
sanfran
Posts: 22
Joined: Wed Nov 20, 2013 11:39 pm

Re: New PenFed CD rates!

Post by sanfran »

am wrote:Can you do the 5 year CD in an IRA?
Happy2BeFree wrote:Yes, you can do IRA CDs as well (including inherited IRAs).
For reference:

https://www.penfed.org/Traditional-IRA-Certificates/

https://www.penfed.org/Roth-IRA/

https://www.penfed.org/Opening-an-IRA-Account/ (opens pdf form)
User avatar
VictoriaF
Posts: 19500
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: New PenFed CD rates!

Post by VictoriaF »

goodenoughinvestor wrote:Their new 4 year rate offers a slightly better 2-yr return after penalties (1.67 vs 1.52)
6 Month 0.300% 0.30%
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%

For those planning to hold the CDs for 2 years, the effective rates are as follows:
  • - Get a 2-year CD and keep it for 2 years, get 1.41% per year.
    - Get a 3-year CD and keep it for 2 years, lose 0.5 year of interest, which is 1.01% and get 1.5 years of interest, or 3.03%, or 1.52% per year.
    - Get a 4-year CD and keep it for 2 years, lose 0.5 year of interest, which is 1.11% and get 1.5 years of interest, or 3.33%, which is about 1.67% per year.
For those planning to hold the CDs for 3 years, the effective rates are as follows:
  • - Get a 3-year CD and keep it for 3 years, get 2.02% per year.
    - Get a 4-year CD and keep it for 3 years, lose 0.5 year of interest, which is 1.11% and get 2.5 years of interest, or 5.55%, which is about 1.85% per year.
Thus, the 4-year CD wins for the 2-year and 4-year holding periods, and the 3-year CD wins for the 3-year holding period.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
User avatar
JamesSFO
Posts: 3241
Joined: Thu Apr 26, 2012 10:16 pm

Re: New PenFed CD rates!

Post by JamesSFO »

VictoriaF wrote:
goodenoughinvestor wrote:Their new 4 year rate offers a slightly better 2-yr return after penalties (1.67 vs 1.52)
6 Month 0.300% 0.30%
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%

For those planning to hold the CDs for 2 years, the effective rates are as follows:
  • - Get a 2-year CD and keep it for 2 years, get 1.41% per year.
    - Get a 3-year CD and keep it for 2 years, lose 0.5 year of interest, which is 1.01% and get 1.5 years of interest, or 3.03%, or 1.52% per year.
    - Get a 4-year CD and keep it for 2 years, lose 0.5 year of interest, which is 1.11% and get 1.5 years of interest, or 3.33%, which is about 1.67% per year.
For those planning to hold the CDs for 3 years, the effective rates are as follows:
  • - Get a 3-year CD and keep it for 3 years, get 2.02% per year.
    - Get a 4-year CD and keep it for 3 years, lose 0.5 year of interest, which is 1.11% and get 2.5 years of interest, or 5.55%, which is about 1.85% per year.
Thus, the 4-year CD wins for the 2-year and 4-year holding periods, and the 3-year CD wins for the 3-year holding period.

Victoria
Thanks Victoria!
kaneohe
Posts: 6753
Joined: Mon Sep 22, 2008 12:38 pm

Re: New PenFed CD rates!

Post by kaneohe »

and where does the 5 yr place in this race?
User avatar
VictoriaF
Posts: 19500
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: New PenFed CD rates!

Post by VictoriaF »

kaneohe wrote:and where does the 5 yr place in this race?
5-year CDs incur 1-year penalties. They are slightly better than 4-year CDs for 4 years. I have not checked other holding durations.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
User avatar
Munir
Posts: 2754
Joined: Mon Feb 26, 2007 4:39 pm
Location: Oregon

Re: New PenFed CD rates!

Post by Munir »

am wrote:Can you do the 5 year CD in an IRA?

If so, why would someone choose total bond over the CD for fixed income other than maybe having easier rebalancing? You could always open multiple CDs and rebalance out of them at a cost of 1 year interest.
Have you compared the short term investment grade bond fund (VFSUX) to CDs?
User avatar
DRiP Guy
Posts: 2241
Joined: Tue Feb 20, 2007 4:54 pm

Re: New PenFed CD rates!

Post by DRiP Guy »

Thanks!

Just picked up a 3 year to help fill in my existing CD ladder.

2.02% APR beats 0.02% in Money Market/Checking!
marcwd
Posts: 389
Joined: Tue Feb 20, 2007 10:15 am
Location: Massachusetts

Re: New PenFed CD rates!

Post by marcwd »

dratkinson wrote:My data point.

Had the last of my 4% CDs mature this month and rolled them over into TE bonds. Not too worried about NAV fluctuation.

Double checked Vanguard today:

VWIUX (IT TE), 2.40% SEC yield, 3.20% TEY (25% bracket), give back 5% to state = 3.04% after tax.

VWLUX (LT TE), 3.48% Sec yield, 4.64% TEY (25% bracket), give back 5% to state = 4.41% after tax.
This doesn't seem right.

The state tax rate will be assessed on what you actually receive - that is, the SEC yield, not the Tax-Equivalent Yield.

The true "after tax" yields are:

VWIUX 2.4% - 5% (state tax) = 2.28%
VWLUX 3.48% - 5% (state tax) = 3.31%
placeholder
Posts: 4097
Joined: Tue Aug 06, 2013 12:43 pm

Re: New PenFed CD rates!

Post by placeholder »

am wrote:If so, why would someone choose total bond over the CD for fixed income other than maybe having easier rebalancing?
Because I can't buy these in my 401k.
john94549
Posts: 4638
Joined: Tue Jul 26, 2011 8:50 pm

Re: New PenFed CD rates!

Post by john94549 »

Have not a clue, but the custodian-to-custodian IRA transfers forms are winging their way. I think I finally figured out how PenFed pushed back on "hot money". For after-tax, there's a limit on CDs, with a waiting period.
User avatar
stevewolfe
Posts: 1537
Joined: Fri Oct 10, 2008 7:07 pm

Re: New PenFed CD rates!

Post by stevewolfe »

john94549 wrote:I think I finally figured out how PenFed pushed back on "hot money". For after-tax, there's a limit on CDs, with a waiting period.
Can you elaborate on what you mean by this? Something in the CD agreement?
User avatar
Bustoff
Posts: 1980
Joined: Sat Mar 03, 2012 6:45 pm

Re: New PenFed CD rates!

Post by Bustoff »

stevewolfe wrote:
john94549 wrote:I think I finally figured out how PenFed pushed back on "hot money". For after-tax, there's a limit on CDs, with a waiting period.
Can you elaborate on what you mean by this? Something in the CD agreement?
Steve
When I opened my account two weeks ago, PenFed advised the maximum deposit was $25,000 and no additional deposits allowed for 6 mo.'s.
That restriction did not apply to IRA transfers.
User avatar
stevewolfe
Posts: 1537
Joined: Fri Oct 10, 2008 7:07 pm

Re: New PenFed CD rates!

Post by stevewolfe »

Bustoff wrote:Steve
When I opened my account two weeks ago, PenFed advised the maximum deposit was $25,000 and no additional deposits allowed for 6 mo.'s.
That restriction did not apply to IRA transfers.
Thank you. They must be changing those parameters as it's been a year or so since I bought the last one there and they didn't have those restrictions in place. Thanks for the information.
island
Posts: 1734
Joined: Tue Jul 23, 2013 1:45 pm

Re: New PenFed CD rates!

Post by island »

Bustoff wrote: Steve
When I opened my account two weeks ago, PenFed advised the maximum deposit was $25,000 and no additional deposits allowed for 6 mo.'s.
That restriction did not apply to IRA transfers.
I asked specifically about NON-IRA deposits over 25K a few weeks ago when I heard about their 4 year rate. I was told > $25K was allowed if the funds were wired or were first deposited into a savings account by a check sent certified mail and that restriction is lifted after one holds the account for 6mos.
However every time I asked a question the person I spoke to had to go ask someone else before relaying the info to me so I didn't have much confidence in him and would ask again before investing. I did open a savings account for $5 (which apparently is required no matter what), just incase I decide to go for a CD. Read here about the potential of higher interest in Dec and waited for that, but not thrilled about the early redemption rate on the 5 year.
goodenoughinvestor
Posts: 295
Joined: Fri Aug 09, 2013 10:33 am

Re: New PenFed CD rates!

Post by goodenoughinvestor »

island wrote:
Bustoff wrote: Steve
When I opened my account two weeks ago, PenFed advised the maximum deposit was $25,000 and no additional deposits allowed for 6 mo.'s.
That restriction did not apply to IRA transfers.
That's not what PenFed told me when I asked the same question. The response I got back (email pasted below) was that you cannot deposit more than $25,000 per day unless you've been a member for more than 6 months. So I've opened a new CD account with them on line (via ACH) each day for the past week! I've already received the signature page paperwork by snail mail for the first two CDs I opened this way.

"There are daily limits on the amount you may transfer into PenFed Online via ACH
electronic transfer. The limits are based on the length of time your membership
has been established.

Deposit limits on memberships open 6 months or less:
Account Type Limit
Share $50.00
Checking/MMSA $50.00
Money Market Certificates $25,000.00

Deposit limits on memberships open MORE than 6 months:
Account Type Limit
Share $5,000
Checking / MMSA $5,000
Money Market Certificates No limit "
island
Posts: 1734
Joined: Tue Jul 23, 2013 1:45 pm

Re: New PenFed CD rates!

Post by island »

goodenoughinvestor wrote:
island wrote:
Bustoff wrote: Steve
When I opened my account two weeks ago, PenFed advised the maximum deposit was $25,000 and no additional deposits allowed for 6 mo.'s.
That restriction did not apply to IRA transfers.
That's not what PenFed told me when I asked the same question. The response I got back (email pasted below) was that you cannot deposit more than $25,000 per day unless you've been a member for more than 6 months. So I've opened a new CD account with them on line (via ACH) each day for the past week! I've already received the signature page paperwork by snail mail for the first two CDs I opened this way.

"There are daily limits on the amount you may transfer into PenFed Online via ACH
electronic transfer. The limits are based on the length of time your membership
has been established.

Deposit limits on memberships open 6 months or less:
Account Type Limit
Share $50.00
Checking/MMSA $50.00
Money Market Certificates $25,000.00

Deposit limits on memberships open MORE than 6 months:
Account Type Limit
Share $5,000
Checking / MMSA $5,000
Money Market Certificates No limit "

Thanks for the additional info. Yeah that's why I said I'd check again before investing since info provide and experienced by others seems to vary.
Here's another thread on the subject. One poster, Chicago, said s/he opened an account with $5, then just mailed a check in excess of 25K for a CD and presumable it was accepted. http://www.bogleheads.org/forum/viewtop ... 4&start=50
Topic Author
Happy2BeFree

Re: New PenFed CD rates!

Post by Happy2BeFree »

I'm confused about this policy. I became a member of PenFed in early Nov. and opened two CDs online (using ACH transfers from a bank). Each was less than 25k, but together they exceeded 25k. A little over a week later, I bought another two CDs, which together did not exceed 25k. Today I bought two more CDs, again, combined, in excess of 25k. I didn't have any problems.
goodenoughinvestor
Posts: 295
Joined: Fri Aug 09, 2013 10:33 am

Re: New PenFed CD rates!

Post by goodenoughinvestor »

Island: Sometimes it seems with financial institutions that you can get a different answer every time you call. (In my experience, Ameritrade is the worst offender.) In such cases, as the saying goes,"it's usually better to apologize than ask permission."

At first I was annoyed that PenFed was capping each CD at $25000 for new members. But then I realized this actually works well for me--I can dole out the savings in small increments as needed, rather than taking the penalty bite on a larger lump sum.
User avatar
Bustoff
Posts: 1980
Joined: Sat Mar 03, 2012 6:45 pm

Re: New PenFed CD rates!

Post by Bustoff »

goodenoughinvestor wrote:
island wrote:
Bustoff wrote: Steve
When I opened my account two weeks ago, PenFed advised the maximum deposit was $25,000 and no additional deposits allowed for 6 mo.'s.
That restriction did not apply to IRA transfers.
That's not what PenFed told me when I asked the same question. The response I got back (email pasted below) was that you cannot deposit more than $25,000 per day unless you've been a member for more than 6 months. So I've opened a new CD account with them on line (via ACH) each day for the past week! I've already received the signature page paperwork by snail mail for the first two CDs I opened this way.

"There are daily limits on the amount you may transfer into PenFed Online via ACH
electronic transfer. The limits are based on the length of time your membership
has been established.

Deposit limits on memberships open 6 months or less:
Account Type Limit
Share $50.00
Checking/MMSA $50.00
Money Market Certificates $25,000.00

Deposit limits on memberships open MORE than 6 months:
Account Type Limit
Share $5,000
Checking / MMSA $5,000
Money Market Certificates No limit "
Thanks for sharing !
Sounds like I got bad information from the PenFed rep I was dealing with. After they told me about the limit, I expressed disappointment and asked them to confirm, but they insisted I had to wait 6 months.
goodenoughinvestor wrote:So I've opened a new CD account with them on line (via ACH) each day for the past week! I've already received the signature page paperwork by snail mail for the first two CDs I opened this way.
That's even better having several CD's. In the event you need an early withdrawal you only need to break one CD.

So you're not adding more money to the existing CD but rather opening new and separate CD's ? All online without speaking to anyone ?
Do you have to open a new account for each CD?
goodenoughinvestor
Posts: 295
Joined: Fri Aug 09, 2013 10:33 am

Re: New PenFed CD rates!

Post by goodenoughinvestor »

goodenoughinvestor wrote:So you're not adding more money to the existing CD but rather opening new and separate CD's ? All online without speaking to anyone ?
Yes! So far, so good. I did this online every day this past week except for Thanksgiving. By Friday I had received two separate mailings for the first two accounts--signature cards, basically, that came with (postage paid!) return envelopes.
goodenoughinvestor
Posts: 295
Joined: Fri Aug 09, 2013 10:33 am

Re: New PenFed CD rates!

Post by goodenoughinvestor »

Bustoff: To be clear, yes I opened a new account for each CD. I opened one a day, at the $25000 limit.
User avatar
Bustoff
Posts: 1980
Joined: Sat Mar 03, 2012 6:45 pm

Re: New PenFed CD rates!

Post by Bustoff »

VictoriaF wrote:
goodenoughinvestor wrote:Their new 4 year rate offers a slightly better 2-yr return after penalties (1.67 vs 1.52)
6 Month 0.300% 0.30%
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%

For those planning to hold the CDs for 2 years, the effective rates are as follows:
  • - Get a 2-year CD and keep it for 2 years, get 1.41% per year.
    - Get a 3-year CD and keep it for 2 years, lose 0.5 year of interest, which is 1.01% and get 1.5 years of interest, or 3.03%, or 1.52% per year.
    - Get a 4-year CD and keep it for 2 years, lose 0.5 year of interest, which is 1.11% and get 1.5 years of interest, or 3.33%, which is about 1.67% per year.
For those planning to hold the CDs for 3 years, the effective rates are as follows:
  • - Get a 3-year CD and keep it for 3 years, get 2.02% per year.
    - Get a 4-year CD and keep it for 3 years, lose 0.5 year of interest, which is 1.11% and get 2.5 years of interest, or 5.55%, which is about 1.85% per year.
Thus, the 4-year CD wins for the 2-year and 4-year holding periods, and the 3-year CD wins for the 3-year holding period.

Victoria
I hate to be the fly in the ointment or the monkey in the wrench, but assuming PenFed could change the terms of the early withdrawal penalties, does anyone know if they allow smaller multiple CD's rather than one large one?
Saluki31
Posts: 104
Joined: Thu Jan 21, 2010 9:45 pm
Location: St. Louis, MO

Re: New PenFed CD rates!

Post by Saluki31 »

Yes, you can open multiple smaller cd's. I think the minimum is $1K. I opened multiple $5K cd's today.
Chicago60
Posts: 491
Joined: Tue Jan 29, 2013 3:40 pm

Re: New PenFed CD rates!

Post by Chicago60 »

I became a new Pen Fed Member three weeks ago and sent a check for over 25K, had it deposited in the new savings account, printed the CD application online, filled it out with my spouse and mailed it to PenFed and purchased a 3 year 2% CD. Today I cancelled the 3 year CD and transferred the funds to a new 5 year 3% CD. Well over 25K and no issues.
island
Posts: 1734
Joined: Tue Jul 23, 2013 1:45 pm

Re: New PenFed CD rates!

Post by island »

Chicago60 wrote:I became a new Pen Fed Member three weeks ago and sent a check for over 25K, had it deposited in the new savings account, printed the CD application online, filled it out with my spouse and mailed it to PenFed and purchased a 3 year 2% CD. Today I cancelled the 3 year CD and transferred the funds to a new 5 year 3% CD. Well over 25K and no issues.
Hi Chicago 60. I remember you posted that in the other thread and was hoping you'd be back to confirm they accepted it.

Another discrepancy...Husband called to clarify eligibility. BIL is a government worker that falls under an approved category for joining. Was told not good enough has to be a direct relative or house mate. Seems arbitrary. I put his name in anyway and it accepted the application no problem.
User avatar
dm200
Posts: 23148
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: New PenFed CD rates!

Post by dm200 »

island wrote:
Chicago60 wrote:I became a new Pen Fed Member three weeks ago and sent a check for over 25K, had it deposited in the new savings account, printed the CD application online, filled it out with my spouse and mailed it to PenFed and purchased a 3 year 2% CD. Today I cancelled the 3 year CD and transferred the funds to a new 5 year 3% CD. Well over 25K and no issues.
Hi Chicago 60. I remember you posted that in the other thread and was hoping you'd be back to confirm they accepted it.

Another discrepancy...Husband called to clarify eligibility. BIL is a government worker that falls under an approved category for joining. Was told not good enough has to be a direct relative or house mate. Seems arbitrary. I put his name in anyway and it accepted the application no problem.
All credit unions have "membership eligibility" requirements. Some are very expansive, while others are quite restrictive - all depends on the state or federal charter of that credit union. PenFed has (or at least used to have) a "back door" to membership (join some association), but I think the federal regulators may be closing that back door. Not sure.

All federal credit unions (today) include "immediate family" and "household members" of those in the field of membership to join. Once someone is a member, that expands to that member's immediate family and household. "Immediate family" can live anywhere and specifically names the relationships: spouse, siblings, parents, children, grandchildren (I think).

Sometimes the exact relationships may not be either understood or enforced by the account reps. I believe that a brother-in-law (in the field of membership) - not in the same household would not qualify you. BUT - assuming the BIL is married to your sister - sister is eligible (as spouse) . So, sister becomes a credit union member (spouse of eligible person). Then, her siblings become eligible as "immediate family". In theory, even a very, very small credit union with a very limited membership eligibility could, over time, include nearly every man, woman and child in the US - if folks started joining and signed up all eligible family and household.
goodenoughinvestor
Posts: 295
Joined: Fri Aug 09, 2013 10:33 am

Re: New PenFed CD rates!

Post by goodenoughinvestor »

Penfed allows you to join if you make a one-time donation to one of the two veteran's non-profit organizations they have listed on their website. I think the cost is $20 or $25. So, basically, anyone can join.
surfer1
Posts: 245
Joined: Fri Jan 08, 2010 9:35 pm

Re: New PenFed CD rates!

Post by surfer1 »

goodenoughinvestor wrote:Bustoff: To be clear, yes I opened a new account for each CD. I opened one a day, at the $25000 limit.
PenFed seems to require opening new accounts by phone now:
"Please call us at 800-247-xxxx and one of our Member Service Representatives will be happy to take your application request over the phone."

Are you calling and creating a new account each time?
goodenoughinvestor
Posts: 295
Joined: Fri Aug 09, 2013 10:33 am

Re: New PenFed CD rates!

Post by goodenoughinvestor »

surfer1 wrote:
goodenoughinvestor wrote:Bustoff: To be clear, yes I opened a new account for each CD. I opened one a day, at the $25000 limit.
PenFed seems to require opening new accounts by phone now:
"Please call us at 800-247-xxxx and one of our Member Service Representatives will be happy to take your application request over the phone."

Are you calling and creating a new account each time?
no--I did it all online. First I joined by clicking on the "join Penfed" tab. Once I had opened a "regular share" account (by paying $5 and joining one of the non-profit veteran-support orgs) I used my user name and password to enter the site. Then I clicked on the "open account/certificate" tab and followed the directions. Note: I wasn't creating IRA accounts--maybe the process is different for those.
User avatar
Kevin M
Posts: 11709
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: New PenFed CD rates!

Post by Kevin M »

So the rumor we heard a week or two ago turned out to be true! I have been preparing for this during the last week, and started acting today.
  • Opened new $115K 3% 5-year CD for my partner with cash we consolidated last week. Did this online in a few minutes.
  • Emailed signed note telling them to do an early withdrawal of the $100K 2% 3-year CD my partner recently opened, and reinvest it in the 3% 5-year CD. Rep verified by phone that they could do this all in one step with the written instructions (was pleasantly surprised at the short phone wait time, but rep did say they are getting a large volume of these requests, so it could be four days or so until it's done).
  • Opened new $80K 5-year 3% CD for myself online with cash I had been raising for other purposes.
  • To raise cash for short-term needs, called Ally and did early withdrawal from two 5-year 2% CDs (EWP 60 days of interest) worth about $15K. Easy; nothing in writing required, and funds are to be available in 1-2 days. (Rep could not believe it when I told her about the 3% CD.)
  • To raise cash for short/intermediate-term needs, and possibly more into another 3% CD, will do early withdrawal of about $50K from a Barclays 5-year 1.85% CD with an EWP of 90 days of interest on Monday.
  • Am considering doing early withdrawals of some of my Ally 2.4% 5-year CDs (EWP 60 days of interest), but they mature in about two years, so they are really 2.4% 2-year CDs. On $100K (less penalty) that's only about $800 more in pre-tax interest after two years with the PenFed 3% CD, and would earn about $2K less if I broke the PenFed CD after two years. I guess I'm leaning against this. Inputs?
  • I cannot take much advantage of this great deal in an IRA because I already will be close to NCUA insurance limit when my PenFed 5-year IRA CD matures in two years. Since that CD is earning 2.75% with an EWP of 180 days of interest, and two years would be just about the break-even point for this move, it's not worth breaking it to reinvest at 3% with an EWP of 365 days of interest. My PenFed 7-year IRA CD is earning 3.49%, so no thought needed on that one yet.
  • I haven't yet seriously considered selling any of my tax-exempt bond funds yet to buy more of the 3% CDs, but will be thinking about it.
  • Have been selling stocks to raise cash, get back to target allocation, and simplify portfolio, and probably will sell more since I'm still a bit above target and would like to put more into these 3% CDs.
FYI, you can do partial early withdrawals from PenFed CDs, so no need to open multiple smaller CDs. Not so with Ally and others, so multiple smaller CDs can make sense at Ally and other institutions.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)
surfer1
Posts: 245
Joined: Fri Jan 08, 2010 9:35 pm

Re: New PenFed CD rates!

Post by surfer1 »

goodenoughinvestor wrote:no--I did it all online. First I joined by clicking on the "join Penfed" tab. Once I had opened a "regular share" account (by paying $5 and joining one of the non-profit veteran-support orgs) I used my user name and password to enter the site. Then I clicked on the "open account/certificate" tab and followed the directions. Note: I wasn't creating IRA accounts--maybe the process is different for those.
Ah, I see. So just to be clear, you click "Join Penfed" just one time, to get a share account. After that, you open a new CD every day using the same login, by clicking "open account/certificate" tab each day? Or are you actually clicking "Join Pedfed" every day, opening up a separate share account each time?
john94549
Posts: 4638
Joined: Tue Jul 26, 2011 8:50 pm

Re: New PenFed CD rates!

Post by john94549 »

It is my understanding that the "no EWP" on partial withdrawals applies to IRA CDs.

That said, I also have my IRA custodian-to-custodian transfer in the mail. Can't beat the 5-year rate these days.
User avatar
sperry8
Posts: 2228
Joined: Sat Mar 29, 2008 9:25 pm
Location: Miami FL

Re: New PenFed CD rates!

Post by sperry8 »

goodenoughinvestor wrote:
surfer1 wrote:
goodenoughinvestor wrote:Bustoff: To be clear, yes I opened a new account for each CD. I opened one a day, at the $25000 limit.
PenFed seems to require opening new accounts by phone now:
"Please call us at 800-247-xxxx and one of our Member Service Representatives will be happy to take your application request over the phone."

Are you calling and creating a new account each time?
no--I did it all online. First I joined by clicking on the "join Penfed" tab. Once I had opened a "regular share" account (by paying $5 and joining one of the non-profit veteran-support orgs) I used my user name and password to enter the site. Then I clicked on the "open account/certificate" tab and followed the directions. Note: I wasn't creating IRA accounts--maybe the process is different for those.
I'm already a member. Do they require anything at all in writing from you/me? Or is it 100% online? I'm traveling overseas and if they send me mail it'll be difficult to get.
BH contest results: 2019: #233 of 645 | 18: #150 of 493 | 17: #516 of 647 | 16: #121 of 610 | 15: #18 of 552 | 14: #225 of 503 | 13: #383 of 433 | 12: #366 of 410 | 11: #113 of 369 | 10: #53 of 282
Post Reply