5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

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protagonist
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5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by protagonist » Tue May 15, 2018 5:02 pm

This is a great deal, but comes with a significant caveat, which is why I am not taking advantage of it. Perhaps others might.

Northwest Credit Union https://www.depositaccounts.com/banks/n ... t-fcu.html

APYs for Heritage Club members (anyone over age 62) for deposits of $1000-99,999 3.15% $100,000-249,999 3.35% $250,000 and over 3.41%
(but be careful about going over $250K with interest as it will only be federally insured up to $250K).

for others: $1000-99,999 3.05% $100,000-249,999 3.10% $250,000 and over 3.15%

WHAT MAKES IT A GREAT DEAL: If over 62 y.o. you are automatically a Heritage Club member and you can withdraw funds any time with NO EWP if held in an IRA. If not there is a hefty 366 day EWP. So for seniors who can get into this in time before the promo disappears (it has been active since late April), it is a great deal.

It is easy to join the credit union.

THE CAVEAT: They absolutely refuse to lock in the rate while your money is being transferred. I spoke to both a rep and a manager about this....the mgr. said they have been fielding requests such as this for years and have never granted an exception, Thus, if like me, you have to break CDs at other institutions to fund the IRA, by the time your funds reach NWFCU (which can sometimes take weeks), the rate could disappear, as great promotions often do. So it comes with significant risk, especially if you are stuck with a large EWP at your current institution.

Hopefully this will be useful to some folks.

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Kevin M
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Kevin M » Tue May 15, 2018 5:37 pm

Looks good, but the caveat is an important one. I almost definitely wouldn't break an existing IRA CD and pay the penalty to do it, but I might consider doing a transfer from maturing IRA proceeds. The risk in that case is that the rate drops before your funds arrive, and you must then do another transfer to another IRA custodian, so another 2-3 weeks before you can start investing it.

I actually have an IRA CD that matured yesterday, but the proceeds are already on their way to Fidelity. Not sure I would have done anything differently for this CD, because I'm getting kind of tired of doing all the IRA transfers, and would be bummed if I had to do two transfers and wait 4-6 weeks to start reinvesting the proceeds. Also, I wouldn't have been able to transfer all the proceeds from the maturing CD due to FDIC/NCUA insurance limits, so would have had to do two transfers anyway, and possibly three if the rate dropped.

If they would guarantee to lock the rate, I'd be more inclined to do it.

Kevin
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Desert
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Desert » Tue May 15, 2018 6:16 pm

For seniors, this looks pretty good. For the rest of us, with 5YT rate at ~2.82 percent, the yield premiums of CD's have decreased enough to make it a tougher decision than a few years ago.

protagonist
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by protagonist » Tue May 15, 2018 10:51 pm

Desert wrote:
Tue May 15, 2018 6:16 pm
For seniors, this looks pretty good. For the rest of us, with 5YT rate at ~2.82 percent, the yield premiums of CD's have decreased enough to make it a tougher decision than a few years ago.
Agreed. With rising rates and a 1 year EWP I would choose a different option...whereas I might have jumped on it 6 months ago, now there are 2 and 3 year options that come close to matching the return with significantly less risk.

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Doc
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Doc » Wed May 16, 2018 9:06 am

At 2:20 PM yesterday the yield on the five Treasury was 3.3% about 2.9%. My error thanks Kevin.

No hassles with what organization you belong to, how old you are, how long it takes to transfer money, and no state tax if in a taxable account. :D

Edited to correct error.
Last edited by Doc on Wed May 16, 2018 11:55 am, edited 1 time in total.
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Kevin M
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Kevin M » Wed May 16, 2018 10:54 am

Doc wrote:
Wed May 16, 2018 9:06 am
At 2:20 PM yesterday the yield on the five Treasury was 3.3%.

No hassles with what organization you belong to, how old you are, how long it takes to transfer money, and no state tax if in a taxable account. :D
Really? 5-year CMT for yesterday was 2.92%, and right now I see 2.929/2.922 (bid/ask) for the 1.75% note maturing 5/15/2023. Let's go with today's yield, even if you really did see 3.3% yesterday (which I doubt). Even the zero-coupon maturing same date is only 3.006/2.962. Even the 30-year CMT was only 3.20% yesterday.

Edit: maybe you are talking about your taxable-equivalent yield? I could see that, but that would apply to an IRA, which is what the OP is about.

Kevin
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Doc
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Doc » Wed May 16, 2018 11:53 am

Kevin M wrote:
Wed May 16, 2018 10:54 am
Really? 5-year CMT for yesterday was 2.92%, and right now I see 2.929/2.922 (bid/ask) for the 1.75% note maturing 5/15/2023.
I read it off the chart wrong. My bad.
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Scooter57
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Scooter57 » Wed May 16, 2018 2:45 pm

If you are investing outside of an IRA, you can make a deposit to a NWFCU share account at any Credit Union Coop Branch in the US. So you can open the accounts in the morning, drive to your local Coop branch, deposit the money into the NWFCU share account at your local CU (if it's a Coop member), phone NWFCU and they'll move the money into the CD you opened online.

It is a lot faster and a WHOLE lot easier to deal with than opening a local CD. I opened one of these NWFCU CDs a few weeks ago as I have a 3% NWFCU CD which was a piece of my CD ladder coming due in a few months and wanted to replace it. They made an error and didn't credit me with being an old fogey, but a single phone call fixed it.

That said, I my CD ladder is weighted towards the near term now because I didn't see anything that appealed to me last year. If the 5 year treasuries continue to climb, I may end up switching to them for the state tax advantage.

Slothmeister
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Slothmeister » Fri May 18, 2018 8:00 am

3% for under 99,000 at any age isn't too bad.

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Kevin M
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Kevin M » Fri May 18, 2018 1:03 pm

Slothmeister wrote:
Fri May 18, 2018 8:00 am
3% for under 99,000 at any age isn't too bad.
It's not very good though. New-issue 3-year brokered CD now is 3% at Fidelity and Vanguard, and you probably can get 3.06% on secondary market at Fidelity if patient. I picked up 9 today at 3.07% for 37-month maturity.

Kevin
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protagonist
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by protagonist » Sat May 19, 2018 10:16 am

Kevin M wrote:
Fri May 18, 2018 1:03 pm
Slothmeister wrote:
Fri May 18, 2018 8:00 am
3% for under 99,000 at any age isn't too bad.
It's not very good though. New-issue 3-year brokered CD now is 3% at Fidelity and Vanguard, and you probably can get 3.06% on secondary market at Fidelity if patient. I picked up 9 today at 3.07% for 37-month maturity.

Kevin
Would you now recommend brokered CDs over treasuries for the 22% marginal tax bracket, Kevin? Following your posts, the rates seem to be increasing nearly daily. I wonder how much longer this will continue.

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Kevin M
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Kevin M » Sat May 19, 2018 3:16 pm

protagonist wrote:
Sat May 19, 2018 10:16 am
Would you now recommend brokered CDs over treasuries for the 22% marginal tax bracket, Kevin? Following your posts, the rates seem to be increasing nearly daily. I wonder how much longer this will continue.
Not necessarily in a taxable account if you pay state income tax, but it's your marginal state income tax rate that matters more, since you pay federal tax on both CDs and Treasuries.

I posted a chart of Treasury TEY vs. new-issue CD yields at my marginal tax rates in another thread, showing that for me Treasury TEY beats CD yield by about 30 basis points at 1-year maturity, 10 bps at 2-year maturity, about 7 bps at 3-year maturity, and at 5-year maturity they are equal. However, this is for large-quantity Treasury purchases, so knock off maybe 2 or 3 basis points for the Treasuries, and I often get 5-10 bps yield premium over new-issue yield on secondary market, so perhaps at 2-year maturity they would be about equal for me.

If they are about equal, I'd prefer the Treasury due to much higher liquidity (much lower bid/ask spread); even though I plan to hold to maturity, having the flexibility to do otherwise is a plus if I'm not giving up yield to get it. In taxable I mainly compare AA munis to Treasuries, and with some exceptions, Treasuries are looking pretty good these days, and require a lot less analysis to buy.

And yes, all yields have been rising pretty steadily lately, but we don't know how long that will continue or how high the yields will go before they flatten out or even start falling.

Kevin
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