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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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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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.

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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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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.

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

Post by protagonist » Mon May 21, 2018 10:08 pm

Kevin M wrote:
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
Thanks again for a great analysis, Kevin.
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.
I agree that we never know when trends will reverse. But if you look at this graph of 10 year Treasury yields since 1790
http://graphics.wsj.com/treasury-low/ , smoothing out the noise, a recurrent pattern of a few (2-4) decades of rise followed by a few decades of fall, etc. emerges. This is not surprising since unlike stocks, which react spontaneously to a complex myriad of factors, Treasury yields are manipulated to reflect when the economy is lagging or gets too "heady" by providing opposite impetus. Similar patterns are seen for Treasuries of different maturities. Summarizing with rough date estimates:
??????-1800 rise
1800-1835 fall
1835-1865 rise
1865-1900 fall
1900-1922 rise
1922- 1948 fall
1948- 1981 MASSIVE rise to all-time high over 15%
1981-2016 MASSIVE fall to all-time low

I don't believe that past history necessarily has predictive value, but there is some potential rational explanation for such a pattern when it comes to Treasury yields, and if the pattern is real it does seem like some time soon the trend is due for a reversal with rising rates. That sometime may be now, or now may just be a blip, but if I had to bet on a rise or a fall over the following years I would definitely put my money on a rise. And even if the odds are only 51-49, or 50.1-49.9 in favor of an impending rise or the pattern being meaningful, it seems to me to make sense to place your bets in that direction.

Does that make any sense to you?

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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 22, 2018 10:14 am

protagonist wrote:
Mon May 21, 2018 10:08 pm
I don't believe that past history necessarily has predictive value, but there is some potential rational explanation for such a pattern when it comes to Treasury yields, and if the pattern is real it does seem like some time soon the trend is due for a reversal with rising rates. That sometime may be now, or now may just be a blip, but if I had to bet on a rise or a fall over the following years I would definitely put my money on a rise. And even if the odds are only 51-49, or 50.1-49.9 in favor of an impending rise or the pattern being meaningful, it seems to me to make sense to place your bets in that direction.
So what bets are you placing?

I'm sticking with my strategy of focusing on the peaks of the steepest segments of the yield curves, using the fixed-income security that appears to provide the highest risk-adjusted return, and picking up good deals when they pop up. Consistent with this, I just bought some secondary market IRA 2.63-year CDs at 3.01%, and some 2-year at 2.85%.

I also continue to deploy new cash, e.g., from proceeds of matured CDs, fairly gradually as long as the increasing rate trend seems to be continuing. I might take 2 weeks to a month to deploy proceeds from the most recently matured CD, depending on the deals that pop up.

With respect to the future of interest rates, I continue to be fairly agnostic. Let's look at some fairly recent history for the 5-year Treasury yield.

Image

This certainly was a rising rate environment for almost three years. But let's look a little further.

Image

Oops! So much for the rising rate trend.

If the current rising rate trend were to end similarly, investing new cash in 2-year to 3-year maturities will have turned out to not earn the best returns for intermediate-term periods. In that case, I'll take solace from continuing to hold some intermediate-term bond funds and some longer-term direct CDs.

Kevin
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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 22, 2018 10:03 pm

Kevin M wrote:
Tue May 22, 2018 10:14 am
So what bets are you placing?

I'm sticking with my strategy of focusing on the peaks of the steepest segments of the yield curves, using the fixed-income security that appears to provide the highest risk-adjusted return, and picking up good deals when they pop up. Consistent with this, I just bought some secondary market IRA 2.63-year CDs at 3.01%, and some 2-year at 2.85%.

I also continue to deploy new cash, e.g., from proceeds of matured CDs, fairly gradually as long as the increasing rate trend seems to be continuing. I might take 2 weeks to a month to deploy proceeds from the most recently matured CD, depending on the deals that pop up.


Kevin
I just came into a fairly large amount of cash from the sale of real estate today.

My strategy is going to be pretty much the same as yours, partly thanks to your thorough analysis. I intend to gradually buy into T-bills, or perhaps brokered CDs , but more likely T-bills, over the next few weeks. Approx. 2-3 year maturity.

I do expect rates will more likely rise than fall over the next few years, and I also know I could be wrong. But I don't want to go longer than 3 years max, and because of the above (and other reasons we discussed), I am more inclined towards Treasuries than CDs (lower bid/ask spreads).

There are bank accounts out there now getting 2% or so, so I don't feel terribly desperate.

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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 22, 2018 11:28 pm

Lower bid ask spreads only matter if you sell before maturity. Comparable or higher TEY in taxable is my bigger reason.

At any rate, staying short term is consistent with your outlook.
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Silk McCue » Wed May 23, 2018 9:49 am

Kevin M wrote:
Tue May 22, 2018 11:28 pm
Lower bid ask spreads only matter if you sell before maturity. Comparable or higher TEY in taxable is my bigger reason.

At any rate, staying short term is consistent with your outlook.
Not wanting to hijack but I see you are active on this thread and you see seem to be the go to person on this topic

Achieva FCU in Florida is offering 5 year CD within an IRA at 4.2% APY with a minimum of $75k. Becoming a member is reasonably easy and inexpensive. I do not know what the EWP is but neither do I care. My wife and I will be fully retired at age 60/62 in 2.5 years and we won't need to touch the funds that we would put into the CD for retirement before the five years is up. The CD would mature 2.5 years into retirement and we would use the funds for the following 3 years to supplement a COLA'd pension. Our needs before that are already accounted for.

We are invested completely in VG Funds with the 4 standard funds that make up the Target Date offering. Our asset allocation is 60/40. Is there any reason that you see that we would not want to move $125k to Achieva rather than have it in the current bond investments at VG?

Thank you for your time.

Cheers

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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 23, 2018 6:41 pm

Silk McCue wrote:
Wed May 23, 2018 9:49 am
Not wanting to hijack but I see you are active on this thread and you see seem to be the go to person on this topic

Achieva FCU in Florida is offering 5 year CD within an IRA at 4.2% APY with a minimum of $75k. Becoming a member is reasonably easy and inexpensive. I do not know what the EWP is but neither do I care. My wife and I will be fully retired at age 60/62 in 2.5 years and we won't need to touch the funds that we would put into the CD for retirement before the five years is up. The CD would mature 2.5 years into retirement and we would use the funds for the following 3 years to supplement a COLA'd pension. Our needs before that are already accounted for.

We are invested completely in VG Funds with the 4 standard funds that make up the Target Date offering. Our asset allocation is 60/40. Is there any reason that you see that we would not want to move $125k to Achieva rather than have it in the current bond investments at VG?

Thank you for your time.

Cheers
That is an incredible rate for a 5-year CD. By comparison, a 5-year new-issued brokered CD at Fidelity earns 3.25%, and 5-year Treasury yield is about 2.8%, so 4.2% is a huge yield premium. Comparing to a 3-year new-issue brokered CD at 3.00%, you earn 120 basis points more, which is 60 basis points per year of extra maturity. That is great by any standards, regardless of the EWP.

Only caveat is that it can take some time to become a member, get the IRA transfer form to Achieva, for them to mail it to Vanguard, and for Vanguard to process it and get the check to Achieva. I figure an average of one week per leg (you -> Achieva, Achiva->VG, VG->Achieva), so about three weeks. It can happen faster if everyone does their job efficiently, and maybe you use overnight mail to get the form to Achieva, and it can take longer if there are any hiccups along the way.

If they will agree to guarantee the rate once they receive the signed IRA transfer form, then that would make it much more attractive. Otherwise, the risk is that the rate drops by the time the IRA transfer is complete, and then you either accept what they are offering at the time, or do another IRA transfer to somewhere else. I have taken this risk a number of times, and usually it worked out, but once or twice I ended up with a lower rate.

Turns out that I am a member of Achieva, and have two IRA CDs there earning 2.71%, maturing in 10/2021, and I think my EWP is six months of interest. At the 4.2% rate, it would make sense for me to do early withdrawals from at least one of them and reinvest at the higher rate, as I'd earn back the EWP of about 1.35% in less than one year. And I don't have the IRA transfer time-lag risk in doing so. I'll probably call them soon to discuss.

I could not do it with both CDs, as I'd already be hitting the NCUA maximum insurance coverage when the existing CDs mature, even at the lower rates. So I'll be running a bit of non-insured risk for a bit until the remaining CD matures, and I transfer the proceeds somewhere else.

It appears that you have to be a Florida resident to join Achieva now. I am not a FL resident, so when I joined they must have had an easy membership eligibility option when I joined.

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

Post by Silk McCue » Wed May 23, 2018 7:28 pm

Kevin M wrote:
Wed May 23, 2018 6:41 pm
That is an incredible rate for a 5-year CD. By comparison, a 5-year new-issued brokered CD at Fidelity earns 3.25%, and 5-year Treasury yield is about 2.8%, so 4.2% is a huge yield premium. Comparing to a 3-year new-issue brokered CD at 3.00%, you earn 120 basis points more, which is 60 basis points per year of extra maturity. That is great by any standards, regardless of the EWP.

Only caveat is that it can take some time to become a member, get the IRA transfer form to Achieva, for them to mail it to Vanguard, and for Vanguard to process it and get the check to Achieva. I figure an average of one week per leg (you -> Achieva, Achiva->VG, VG->Achieva), so about three weeks. It can happen faster if everyone does their job efficiently, and maybe you use overnight mail to get the form to Achieva, and it can take longer if there are any hiccups along the way.

If they will agree to guarantee the rate once they receive the signed IRA transfer form, then that would make it much more attractive. Otherwise, the risk is that the rate drops by the time the IRA transfer is complete, and then you either accept what they are offering at the time, or do another IRA transfer to somewhere else. I have taken this risk a number of times, and usually it worked out, but once or twice I ended up with a lower rate.

Turns out that I am a member of Achieva, and have two IRA CDs there earning 2.71%, maturing in 10/2021, and I think my EWP is six months of interest. At the 4.2% rate, it would make sense for me to do early withdrawals from at least one of them and reinvest at the higher rate, as I'd earn back the EWP of about 1.35% in less than one year. And I don't have the IRA transfer time-lag risk in doing so. I'll probably call them soon to discuss.

I could not do it with both CDs, as I'd already be hitting the NCUA maximum insurance coverage when the existing CDs mature, even at the lower rates. So I'll be running a bit of non-insured risk for a bit until the remaining CD matures, and I transfer the proceeds somewhere else.

It appears that you have to be a Florida resident to join Achieva now. I am not a FL resident, so when I joined they must have had an easy membership eligibility option when I joined.

Kevin
Thank you Kevin. Detail provided greatly appreciated.

Cheers

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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 23, 2018 10:39 pm

Here are my rough calculations on the net yield this would be for me if I broke my 2.7% CD, assuming EWP of six months of interest = 1.35%.

Net interest rate for first year is 4.2% - 1.35% = 2.85%, then for next four years I earn 4.2%. So for the 5-year period, net yield is:

( (1+2.85%) * (1+4.2%)^4 ) ^ (1/5) - 1 = 3.93%

Sanity check: 1.35% EWP amortized over five years is 0.27% per year, and 4.2% - 3.93% = 0.27%.

Even 3.93% seems quite good for 5-year CD, with 5-year brokered CD at 3.25%. And bps/year for extending from 2-year at 2.85% is 36 = (3.25 - 2.85) / 3 * 100--almost twice the Swedroe guideline of 20 bps/year.

If anyone sees any flaws in my calculations, please let me know.

Kevin
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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 » Thu May 24, 2018 9:19 am

The biggest snag with Achieva CU is they will not lock in the rate when you apply.

I had that confirmed by both a phone rep and a "supervisor".

Thus transferring funds from another CD is risky and can incur an EWP, only to find that you are offered a lower rate at Achieva. Their other rates are not very competitive.

If anybody else finds out a way around this, please let me know.

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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 » Thu May 24, 2018 1:36 pm

Silk McCue wrote:
Wed May 23, 2018 9:49 am
Achieva FCU in Florida is offering 5 year CD within an IRA at 4.2% APY with a minimum of $75k.
Silk McCue wrote:
Wed May 23, 2018 7:28 pm
Thank you Kevin. Detail provided greatly appreciated.
You are very welcome, but I want to also thank you for bringing this to our (my) attention. This turned out to be an exceptional deal for me--better than I thought it would.

I dug out my disclosure for one of my Achieva CU CDs (luckily easy to find), and it turns out that this is one of the CUs that waives the EWP if you are age 59 1/2 or older! When I called the rep, she first mentioned the 180 days of interest EWP, but then I mentioned the age exception, she checked with her IRA department, and lo and behold, they verified that there would be no penalty. So I'll earn the full 4.2% APY, as opposed to about 3.9% if I had paid the EWP. Win # 1.

She also verified that the age 59 1/2 or over EWP exception still applied to the new CD.

Then I started explaining that I'd like to do the full amount for one of the CDs, but a partial amount for the other, since I would end up well over the $250K NCUA insurance limit by the end of the five year term--I'd actually exceed it by about $7K by the time the second CD matured on 10/28/2021 even if I just did it for the one CD. At that point I hadn't thought about the fact that I could just do a penalty-free IRA transfer to another custodian when I exceeded the $250K limit, but before thinking about it, she told me that Achieva pays for an additional $250K of coverage, so I was insured up to $500K.

So win #2 is that I was able to do penalty-free early withdrawals of the full amounts from both CDs (approximately 3.5 years remaining until maturity) paying 2.71% APY, and move them into a single 5-year CD paying 4.2% APY. She said this all should be completed no later than 4pm eastern tomorrow.

She said she would send me details on the additional $250K deposit insurance. If after reviewing this I'm not comfortable with it, I still have the options to do a penalty-free IRA transfer to another custodian once I start to exceed $250K.

Even though there aren't many really great IRA direct CD deals out there these days, this certainly turned out to be one for me (both the original CDs and the new one). A testimony to the value of a great direct CD deal if and when you can find one.

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

Post by Riley15 » Thu May 24, 2018 2:44 pm

Silk McCue wrote:
Wed May 23, 2018 9:49 am
Kevin M wrote:
Tue May 22, 2018 11:28 pm
Lower bid ask spreads only matter if you sell before maturity. Comparable or higher TEY in taxable is my bigger reason.

At any rate, staying short term is consistent with your outlook.
Not wanting to hijack but I see you are active on this thread and you see seem to be the go to person on this topic

Achieva FCU in Florida is offering 5 year CD within an IRA at 4.2% APY with a minimum of $75k. Becoming a member is reasonably easy and inexpensive. I do not know what the EWP is but neither do I care. My wife and I will be fully retired at age 60/62 in 2.5 years and we won't need to touch the funds that we would put into the CD for retirement before the five years is up. The CD would mature 2.5 years into retirement and we would use the funds for the following 3 years to supplement a COLA'd pension. Our needs before that are already accounted for.

We are invested completely in VG Funds with the 4 standard funds that make up the Target Date offering. Our asset allocation is 60/40. Is there any reason that you see that we would not want to move $125k to Achieva rather than have it in the current bond investments at VG?

Thank you for your time.

Cheers
What are the membership requirements for Achieva if you don't live in Florida?

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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 » Thu May 24, 2018 2:53 pm

Riley15 wrote:
Thu May 24, 2018 2:44 pm
What are the membership requirements for Achieva if you don't live in Florida?
It looks like there is still an easy membership option. Go to https://www.achievacu.com/Home/Membership/. Leave the county selection blank, and choose "No" for are you related to a current member (unless you are, then of course choose "yes"). You then will see:
GOOD news! For a minimum donation to our foundation, you can still qualify for membership with Achieva
Click the LEARN MORE button below.

I think you would want to apply just for Achieva Savings (no monthly service fee). Looks like a total of $25 of fees and donations, plus a minimum $1 savings deposit, so total of $26. Well worth it for this excellent CD deal.

Kevin
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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 » Thu May 24, 2018 4:44 pm

Kevin M wrote:
Thu May 24, 2018 2:53 pm
Riley15 wrote:
Thu May 24, 2018 2:44 pm
What are the membership requirements for Achieva if you don't live in Florida?
It looks like there is still an easy membership option. Go to https://www.achievacu.com/Home/Membership/. Leave the county selection blank, and choose "No" for are you related to a current member (unless you are, then of course choose "yes"). You then will see:
GOOD news! For a minimum donation to our foundation, you can still qualify for membership with Achieva
Click the LEARN MORE button below.

I think you would want to apply just for Achieva Savings (no monthly service fee). Looks like a total of $25 of fees and donations, plus a minimum $1 savings deposit, so total of $26. Well worth it for this excellent CD deal.

Kevin

Correct, and it works to join. I just did it. I am going to take a huge chance, take a distribution from a Penfed IRA CD, and hope that the money arrives in time. One catch is that they cannot open the certificate until the funds are available in your core account at Achieva, so you need to do a rollover into a non-IRA account at Achieva, and then move the money into the IRA certificate. You have 60 days from taking a distribution to place it in an IRA account to avoid taxation, which should be enough time. One catch is that I was told this can only be done once per 365 days. So if you did it with another account, or if you want to move money from more than one IRA account, you have to wait 365 days to do so.

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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 » Thu May 24, 2018 7:37 pm

protagonist wrote:
Thu May 24, 2018 4:44 pm
One catch is that they cannot open the certificate until the funds are available in your core account at Achieva, so you need to do a rollover into a non-IRA account at Achieva, and then move the money into the IRA certificate.
I would double-check this. I know for a fact I did not do this, as I have never done a rollover, but always direct custodian transfers, so I know I did two direct transfers from another IRA custodian to Achieva in Oct 2016.

You probably have to do an additional application to open an IRA after you become a member, and then I think they open an IRA savings account for you. I don't recall if you specify IRA CD on their transfer form or not, but I do know the proceeds were transferred first into the IRA savings account, and then into the IRA CD.

Having said this, it may actually be faster to do the rollover, as you might save time in not having to mail the transfer form to PenFed, then have them mail it to Achieva. On the other hand, they'll mail you a check, which you then will have to mail to Achieva. Not really sure this would be faster.
You have 60 days from taking a distribution to place it in an IRA account to avoid taxation, which should be enough time. One catch is that I was told this can only be done once per 365 days. So if you did it with another account, or if you want to move money from more than one IRA account, you have to wait 365 days to do so.
Correct on both counts. The latter is the reason I'd keep this in my back pocket for a situation in which it seemed clearly superior to doing a direct IRA transfer, for example if you knew for a fact it would be faster, the deal was super (like this one), and you felt this was the one to use your once-per-year rollover.

Kevin
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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 » Thu May 24, 2018 7:42 pm

Happy to see that Achieva has already closed out my two CDs at 2.71% APY and opened the one at 4.2% APY. That was fast and easy.

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

Post by Silk McCue » Thu May 24, 2018 8:28 pm

Kevin M wrote:
Thu May 24, 2018 7:42 pm
Happy to see that Achieva has already closed out my two CDs at 2.71% APY and opened the one at 4.2% APY. That was fast and easy.

Kevin
That is excellent. Congratulations!

Cheers

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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 » Thu May 24, 2018 8:42 pm

Kevin M wrote:
Thu May 24, 2018 7:42 pm
Happy to see that Achieva has already closed out my two CDs at 2.71% APY and opened the one at 4.2% APY. That was fast and easy.

Kevin
Fantastic! Congratulations!

I don't know how you originally managed to do a direct transfer into an IRA at Achieva if you did not have one before.
I am now a member and I went online to see if I could open an IRA. There are no links to open any accounts that I could find on their website...no links to forms either. I logged in and only saw the small savings account I opened when I joined. The rep (Ludovic) said transfer was impossible, as was locking in a rate, until you had an IRA account, and that can only happen once the funds are in the institution. I will try calling again tomorrow...maybe I will get a different answer from a different person.
Last edited by protagonist on Thu May 24, 2018 8:56 pm, edited 1 time in total.

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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 » Thu May 24, 2018 8:55 pm

Kevin M wrote:
Thu May 24, 2018 1:36 pm


I dug out my disclosure for one of my Achieva CU CDs (luckily easy to find), and it turns out that this is one of the CUs that waives the EWP if you are age 59 1/2 or older! When I called the rep, she first mentioned the 180 days of interest EWP, but then I mentioned the age exception, she checked with her IRA department, and lo and behold, they verified that there would be no penalty. So I'll earn the full 4.2% APY, as opposed to about 3.9% if I had paid the EWP. Win # 1.

She also verified that the age 59 1/2 or over EWP exception still applied to the new CD.

This is also the info I received! The only catch is that their disclosure agreement specifies that allowing premature withdrawals is at the bank's discretion.

My plan is to first fund a 5 yr IRA with about $112K from a zero-EWP 3.04% CD maturing in 32 months from Penfed. I will probably have to do a 60 day rollover though you have given me some hope for a transfer....just hoping my funds arrive before they withdraw the offer!

If I can then do a direct transfer , since I will have established an IRA account, I will move more IRA funds from Andrews (3%, 62 mo to maturity, 6 mo EWP). If it is really insured to 500K I will move another 140K or so. But if they will not allow a direct transfer I will not be able to move any more funds in for at least a year, so I need to wait and see.

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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 » Thu May 24, 2018 9:17 pm

protagonist wrote:
Thu May 24, 2018 8:42 pm
I don't know how you managed to do a direct transfer into an IRA at Achieva if you did not have one before.
I am now a member and I went online to see if I could open an IRA. There are no links to open any accounts that I could find on their website...no links to forms either. I logged in and only saw the small savings account I opened when I joined. The rep (Ludovic) said transfer was impossible, as was locking in a rate, until you had an IRA account, and that can only happen once the funds are in the institution. I will try calling again tomorrow...maybe I will get a different answer from a different person.
Ask to speak to someone in the IRA department. The front line reps don't always know what they're talking about. Here's how it went for me, based on the emails I still have.

9/13/2016: Membership application under review.
9/14/2016: Received an email about reports showing that I'd applied for membership or account ownership to multiple financial institutions. Asked me to provide my intentions for joining. I replied that my intention was to open an IRA CD, and transfer proceeds from Ally Bank.
9/15/2016: Received an email with a DocuSign signature card to sign. Also indicated they needed my drivers license--don't remember if I uploaded that as part of the sign up, but I got it to them somehow.
9/16/2016: Received email with temporary password to sign up for online access.
9/19/2016: Received email with IRA applications and IRA transfer form. I must have requested these by phone. I received them from Maureen Burnosky. They sent me the IRA transfer form with their part filled out and signed, so I just had to fill in some additional info, sign it, and mail it to Ally.
9/20/2016: I emailed them scans or pictures of two pages of the signed IRA application. One of those pages did indicate that it was a transfer, and that the investment option was a 60-month IRA CD.
10/04/2016: Funds transferred from Ally deposited into IRA savings account, then into IRA CD.

There were additional emails about a subsequent IRA transfer I did from Fidelity. I screwed that one up and put the wrong account number on the form, and I didn't find out about that until I called Fidelity a couple of weeks later. Then after submitting the corrected form, apparently the check Fidelity sent got lost in the mail. Then Fidelity sent a new check by overnight mail, and it got to Achieva. This was the first time I ever had problems like this with an IRA transfer, but it worked out in the end. It did take time to resolve though.

Kevin
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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 » Thu May 24, 2018 9:21 pm

protagonist wrote:
Thu May 24, 2018 8:55 pm
This is also the info I received! The only catch is that their disclosure agreement specifies that allowing premature withdrawals is at the bank's discretion.
Yes, this is pretty standard language. Today there was not even a second of hesitation on the rep's part about doing an early withdrawal. Of course they might take advantage of this clause if they were in some kind of financial distress, and didn't want to lose the funds at a low interest rate.

Kevin
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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 » Thu May 24, 2018 10:53 pm

Kevin M wrote:
Thu May 24, 2018 9:17 pm
protagonist wrote:
Thu May 24, 2018 8:42 pm
I don't know how you managed to do a direct transfer into an IRA at Achieva if you did not have one before.
I am now a member and I went online to see if I could open an IRA. There are no links to open any accounts that I could find on their website...no links to forms either. I logged in and only saw the small savings account I opened when I joined. The rep (Ludovic) said transfer was impossible, as was locking in a rate, until you had an IRA account, and that can only happen once the funds are in the institution. I will try calling again tomorrow...maybe I will get a different answer from a different person.
Ask to speak to someone in the IRA department. The front line reps don't always know what they're talking about. Here's how it went for me, based on the emails I still have.

9/13/2016: Membership application under review.
9/14/2016: Received an email about reports showing that I'd applied for membership or account ownership to multiple financial institutions. Asked me to provide my intentions for joining. I replied that my intention was to open an IRA CD, and transfer proceeds from Ally Bank.
9/15/2016: Received an email with a DocuSign signature card to sign. Also indicated they needed my drivers license--don't remember if I uploaded that as part of the sign up, but I got it to them somehow.
9/16/2016: Received email with temporary password to sign up for online access.
9/19/2016: Received email with IRA applications and IRA transfer form. I must have requested these by phone. I received them from Maureen Burnosky. They sent me the IRA transfer form with their part filled out and signed, so I just had to fill in some additional info, sign it, and mail it to Ally.
9/20/2016: I emailed them scans or pictures of two pages of the signed IRA application. One of those pages did indicate that it was a transfer, and that the investment option was a 60-month IRA CD.
10/04/2016: Funds transferred from Ally deposited into IRA savings account, then into IRA CD.

There were additional emails about a subsequent IRA transfer I did from Fidelity. I screwed that one up and put the wrong account number on the form, and I didn't find out about that until I called Fidelity a couple of weeks later. Then after submitting the corrected form, apparently the check Fidelity sent got lost in the mail. Then Fidelity sent a new check by overnight mail, and it got to Achieva. This was the first time I ever had problems like this with an IRA transfer, but it worked out in the end. It did take time to resolve though.

Kevin
Great! Thanks for the details, Kevin! Perhaps with your permission I will copy this record and email it to them if they tell me the same thing again. (not mentioning you by name of course).

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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 25, 2018 9:29 am

protagonist wrote:
Thu May 24, 2018 10:53 pm
Great! Thanks for the details, Kevin! Perhaps with your permission I will copy this record and email it to them if they tell me the same thing again. (not mentioning you by name of course).
First ask to talk to IRA specialist--maybe ask if the person I named still works there, and if you can talk to her. OK with me if you email just the part about them sending me the IRA transfer form.

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

Post by Sandtrap » Fri May 25, 2018 9:39 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
kevin,
researching new issues at Vanguard and Schwab for the past 2 weeks.
Did you get those at Fido or Vanguard?
Which ones?
What size were the "lots". (still trying to grasp that concept).
thanks,
jim

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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 » Fri May 25, 2018 1:14 pm

Kevin M wrote:
Fri May 25, 2018 9:29 am
protagonist wrote:
Thu May 24, 2018 10:53 pm
Great! Thanks for the details, Kevin! Perhaps with your permission I will copy this record and email it to them if they tell me the same thing again. (not mentioning you by name of course).
First ask to talk to IRA specialist--maybe ask if the person I named still works there, and if you can talk to her. OK with me if you email just the part about them sending me the IRA transfer form.

Kevin
I have asked. They either don't have IRA specialists, or they refuse to let customers talk with them directly. I mentioned the name you quoted. And I did get another person to confirm that I can do a direct transfer. The hangup now is waiting to get my account officially opened, which is taking more time than it seems it should....it is "being reviewed". I do have the IRA app. and the direct transfer form, but I was told they can do nothing until my account is officially opened, and they def. cannot lock in a rate. So I will have to figure out which is faster...a rollover with funds wired or a direct transfer....once my account and IRA is opened. Penfed says they can distribute the funds to my core account and wire them within a day for $20, so that might be the most efficient option (if it works). I would rather do direct transfer (obviously) but I am nervous about losing the rate and being stuck with my funds in Achieva. I am even more nervous about breaking my Andrews CD since that would incur a significant EWP if the 4.2% rate disappears, so I think I will probably rollover the funds from Penfed and forget about subsequent direct transfer from Andrews, where I will continue to get 3% for 62 more months (6 mo EWP).

Do you think this is a wise strategy?

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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 25, 2018 7:08 pm

Sandtrap wrote:
Fri May 25, 2018 9:39 am
kevin,
researching new issues at Vanguard and Schwab for the past 2 weeks.
Did you get those at Fido or Vanguard?
Which ones?
What size were the "lots". (still trying to grasp that concept).
thanks,
jim
With new issues there's really not much to research. Both Vanguard and Fidelity show the top rates for new issues on their yields summary pages, and they're usually the same, although sometimes one increases sooner than the other (lately Fidelity increases first). Currently both are 2.80% for 2-year and 3.00% for 3-year. I haven't had an account at Schwab in years, so don't look there, but I assume they are same.

Generally I've been seeing better CD deals on secondary market at Fidelity than at Vanguard.

I've almost always been buying on secondary market at Fidelity, since I can almost always at least match new-issue yield (even after commission of $1/CD) with much quicker settlement, and often can beat it by 5 basis points or more, although not always. For example, last couple of days I could match 2-year at 2.80%, but couldn't beat it by more than 1 basis point when I checked, but the couple of days before that I could beat it by at least 5 basis points (so 2.85% or more) after commission. I'd say every day I see 3-year at 3.06% or 3.07% net on secondary, so easier to beat the 3-year new-issue yield.

My most common lot size is 10, which is $10,000 face value (1 CD is $1,000 face value), but sometimes I'll buy 20 if the deal looks really good. I screen out lot sizes of 5 or less, since I don't want to mess around with purchases that small, but I might buy 8 if it's a good deal, for example. Or there might be a really good deal with 14 available, in which case I might by 14. If I just wanted to get it all invested quickly, I would buy larger lots, but lately rates have been continuing to increase every couple of weeks, and good deals pop up some days and not others, so I've found that patience has been paying off. If I were to go 2 or 3 days with nothing much better than new-issue yield, I'd probably buy another 10 at the new-issue yield, but on secondary market for faster settlement.

Also, if you look several times a day, good deals can pop up later in the day when there were none earlier.

It's often pointed out that if you look at the dollar amounts, 5 basis points more is really not significant, but I enjoy the hunt, and am retired, so have the time to monitor the market, and head over to Bogleheads if there's nothing attractive at the moment.

Kevin
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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 25, 2018 7:21 pm

protagonist wrote:
Fri May 25, 2018 1:14 pm
Do you think this is a wise strategy?
I think you are more willing to work for these deals than I am at this point. As I recall, you got in on the last 4% 5-year CD deal that came around, which required joining another credit union, doing an early withdrawal, and doing the IRA transfer. I was too lazy (and busy with other things at the time) to bother. So I think my strategy now is that if it's easy and guaranteed, I'll do it, but otherwise maybe not.

I don't think I'd pay an EWP and take the risk of the rate dropping, but if you can do it without an EWP, maybe. I'd think about the contingency plan, which would involve doing another transfer out of Achieva if the rate dropped, maybe to Fidelity to go with brokered CDs. But I'd be hesitant to pay an EWP on a 3% CD, with 3 or 4 years left to maturity, since you'll only get about 3% on a 3-year brokered CD right now.

It does kind of sting to be holding CDs at 3% with five or more years left to maturity, when you can now get 3% on a 3-year CD, but it's no worse than the losses we've suffered in bond funds, and better than someone who bought a similar-maturity Treasury at the time at 2% or less. We still have the early withdrawal option, and brokered CD rates could increase enough at some point to make breaking the 3% CD worth it, or maybe a deal will come along where they'll agree to lock the rate (like the 4% one you did, as I recall).

Kevin
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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 26, 2018 6:35 am

Kevin M wrote:
Fri May 25, 2018 7:21 pm
protagonist wrote:
Fri May 25, 2018 1:14 pm
Do you think this is a wise strategy?
I think you are more willing to work for these deals than I am at this point. As I recall, you got in on the last 4% 5-year CD deal that came around, which required joining another credit union, doing an early withdrawal, and doing the IRA transfer. I was too lazy (and busy with other things at the time) to bother. So I think my strategy now is that if it's easy and guaranteed, I'll do it, but otherwise maybe not.

I don't think I'd pay an EWP and take the risk of the rate dropping, but if you can do it without an EWP, maybe. I'd think about the contingency plan, which would involve doing another transfer out of Achieva if the rate dropped, maybe to Fidelity to go with brokered CDs. But I'd be hesitant to pay an EWP on a 3% CD, with 3 or 4 years left to maturity, since you'll only get about 3% on a 3-year brokered CD right now.

It does kind of sting to be holding CDs at 3% with five or more years left to maturity, when you can now get 3% on a 3-year CD, but it's no worse than the losses we've suffered in bond funds, and better than someone who bought a similar-maturity Treasury at the time at 2% or less. We still have the early withdrawal option, and brokered CD rates could increase enough at some point to make breaking the 3% CD worth it, or maybe a deal will come along where they'll agree to lock the rate (like the 4% one you did, as I recall).

Kevin
I agree, Kevin. Our strategies are not so different. As I stated above: " I am even more nervous about breaking my Andrews CD since that would incur a significant EWP if the 4.2% rate disappears, so I think I will probably rollover the funds from Penfed and forget about subsequent direct transfer from Andrews, where I will continue to get 3% for 62 more months (6 mo EWP). "

What makes the Achieva deal particularly tempting is the no EWP provision for seniors....otherwise I wouldn't give breaking the Andrews CD another thought. I anticipate more rate hikes, though I know I could be wrong. The last 4% CD I purchased was by breaking a CD at another institution that did not charge an EWP, like Penfed (Patelco).

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

Post by Sandtrap » Sat May 26, 2018 9:02 am

Kevin M wrote:
Fri May 25, 2018 7:08 pm
Sandtrap wrote:
Fri May 25, 2018 9:39 am
kevin,
researching new issues at Vanguard and Schwab for the past 2 weeks.
Did you get those at Fido or Vanguard?
Which ones?
What size were the "lots". (still trying to grasp that concept).
thanks,
jim
With new issues there's really not much to research. Both Vanguard and Fidelity show the top rates for new issues on their yields summary pages, and they're usually the same, although sometimes one increases sooner than the other (lately Fidelity increases first). Currently both are 2.80% for 2-year and 3.00% for 3-year. I haven't had an account at Schwab in years, so don't look there, but I assume they are same.

Generally I've been seeing better CD deals on secondary market at Fidelity than at Vanguard.

I've almost always been buying on secondary market at Fidelity, since I can almost always at least match new-issue yield (even after commission of $1/CD) with much quicker settlement, and often can beat it by 5 basis points or more, although not always. For example, last couple of days I could match 2-year at 2.80%, but couldn't beat it by more than 1 basis point when I checked, but the couple of days before that I could beat it by at least 5 basis points (so 2.85% or more) after commission. I'd say every day I see 3-year at 3.06% or 3.07% net on secondary, so easier to beat the 3-year new-issue yield.

My most common lot size is 10, which is $10,000 face value (1 CD is $1,000 face value), but sometimes I'll buy 20 if the deal looks really good. I screen out lot sizes of 5 or less, since I don't want to mess around with purchases that small, but I might buy 8 if it's a good deal, for example. Or there might be a really good deal with 14 available, in which case I might by 14. If I just wanted to get it all invested quickly, I would buy larger lots, but lately rates have been continuing to increase every couple of weeks, and good deals pop up some days and not others, so I've found that patience has been paying off. If I were to go 2 or 3 days with nothing much better than new-issue yield, I'd probably buy another 10 at the new-issue yield, but on secondary market for faster settlement.

Also, if you look several times a day, good deals can pop up later in the day when there were none earlier.

It's often pointed out that if you look at the dollar amounts, 5 basis points more is really not significant, but I enjoy the hunt, and am retired, so have the time to monitor the market, and head over to Bogleheads if there's nothing attractive at the moment.

Kevin
wow...
thanks for the education.....i'm a noob at brokerage cd's

please explain..........faster settlement

mahalo
jim

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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 26, 2018 12:42 pm

Sandtrap wrote:
Sat May 26, 2018 9:02 am
please explain..........faster settlement
The settlement date is when you actually buy it, and the cash to pay for it is removed from your settlement/core fund. On the secondary market, this is T+2 for a CD, so if you place the order and it's accepted on Tuesday, it will settle on Thursday.

Usually when a new issue first hits, the settlement date is at least a week away, and it can be as much as two weeks away. For example, there is a new issue 2-year at 2.80% at Fidelity with settlement date of 6/6/2018, so about 1.5 weeks if you had bought it on Friday. However, there's also one at the same rate with a settlement date of 5/30, which is only one day more than if you had bought on the secondary market on Friday. But that one will become unavailable on Monday or Tuesday, so then you're looking at a best case settlement of more than one week.

I would rather get my money into the CD sooner rather than later once I've decided I want to buy, so I buy on secondary market if I can at least match the new-issue yield (after paying commission for the secondary), which almost always is possible for the CDs I've been looking at.

As a side note, a new-issue CD sometimes starts trading on the secondary market at a higher net yield before its first settlement date, which is another reason I prefer the secondary market.

But secondary market is more work, so for someone who doesn't want to spend the extra time doing secondary market searches, new issues are fine.

Kevin
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Mitchell777
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Re: 5 yr CD up to 3.41% APY, NO EWP for seniors in IRA, but with catch

Post by Mitchell777 » Sat May 26, 2018 2:34 pm

Kevin M wrote:
Sat May 26, 2018 12:42 pm
Sandtrap wrote:
Sat May 26, 2018 9:02 am
please explain..........faster settlement
As a side note, a new-issue CD sometimes starts trading on the secondary market at a higher net yield before its first settlement date, which is another reason I prefer the secondary market.
Kevin - If it is new issue. how does it get onto the secondary market before the new issue settlement date?

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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 26, 2018 3:43 pm

Mitchell777 wrote:
Sat May 26, 2018 2:34 pm
Kevin M wrote:
Sat May 26, 2018 12:42 pm
As a side note, a new-issue CD sometimes starts trading on the secondary market at a higher net yield before its first settlement date, which is another reason I prefer the secondary market.
Kevin - If it is new issue. how does it get onto the secondary market before the new issue settlement date?
That's an excellent question, and I honestly don't know the answer. I can think of two explanations.

One is that someone's offer for the new issue has been accepted two market days before it settles, and for some reason they decide to sell it for less than they paid. I don't know if this could trigger a free riding violation, but I think it would be OK in a margin account.

The other explanation that comes to mind is that the bank is not selling the new issue as fast as they want, so they offer some on the secondary market at a lower price.

I really don't know how the secondary CD market works with respect to this type of thing, so these are just guesses. Maybe someone who knows more about it can chime in.

I do know for sure it happens though, because sometimes when I've found a good deal on the secondary market at Fidelity, I search for the CUSIP at Vanguard, and find it available only as a new issue at price of 100.

Kevin
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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 26, 2018 5:32 pm

Kevin M wrote:
Thu May 24, 2018 1:36 pm
<snip> ... she told me that Achieva pays for an additional $250K of coverage, so I was insured up to $500K.
<snip>
She said she would send me details on the additional $250K deposit insurance. If after reviewing this I'm not comfortable with it, I still have the options to do a penalty-free IRA transfer to another custodian once I start to exceed $250K.
The additional $250K insurance is through Excess Share Insurance Corporation (ESI). From their website (and similar language was in the document Achieva rep sent me):
Our success can be attributed to thorough underwriting and risk management policies and practices. We are selective as to who we insure, and not all credit unions that apply for coverage are accepted due to ESI’s strict underwriting standards. Furthermore, we examine our credit unions regularly to ensure continued safety and soundness. Also, ESI’s insurance policy requires that every credit union submit financial statements and a listing of accounts eligible for excess coverage quarterly in order to continue coverage.
Document also stated that insurance could be terminated by either credit union or ESI, but that you would be notified in writing of any change in coverage. However, she told me over the phone that they would not necessarily notify me in writing, so not sure about that one.

I am comfortable enough with this to go somewhat over $250K, but not sure I'd want to approach $500K. Transferring out penalty free would be the workaround if the excess coverage was terminated, but I'd feel like I'd have to periodically call and check to verify that the coverage was still in place, and there's always the possibility that they could exercise their right to deny an early withdrawal. Finally, this is private insurance, so probably not as reliable as the federal NCUA insurance.

Kevin
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