Flaw in Logic? CD ladder instead of bond funds

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Michele in TX
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Flaw in Logic? CD ladder instead of bond funds

Post by Michele in TX » Fri Jun 15, 2018 1:54 pm

I am considering DCA'ing out of the Vanguard Intermediate-Term Bond ETF (BIV) into a CD ladder. I have cash to cover 4 years of expenses. The cash is my "I can sleep at night" fund. In about 4 years I will begin to use my retirement funds. The BIV is a part of my retirement funds. If I am looking for "debt" instruments to provide stability in my retirement funds why are bond funds better than a CD ladder, other than liquidity? Neither the BIV or the Vanguard Total Bond Fund ETF (BND) returns have kept up with inflation for the last 5 years.

Where's the flaw in my logic in thinking a CD ladder will be a better investment than a bond fund?

This group has always helped me poke holes in my logic and see the bigger picture. Thanks.

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Pajamas
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Pajamas » Fri Jun 15, 2018 1:58 pm

Might be more trouble to rebalance on schedule.

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JoMoney
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by JoMoney » Fri Jun 15, 2018 2:10 pm

I don't think it is flawed. I have grown to have a preference for CDs over bond funds. I don't think "liquidity" is even a factor with CD's, you don't have to find someone to buy a CD you just cash it in with the bank. With some banks, you can do an early withdrawal from a CD via the banks online portal at 11pm on a Sunday night and withdraw it as cash at an ATM minutes later.... try that with a bond fund.
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by onourway » Fri Jun 15, 2018 2:11 pm

The main flaws are that CD's make it difficult to re-balance your portfolio, maintaining a CD ladder requires constant attention if you want to remain in cd's with competitive rates, and over the long run, CD's should generally return less that a good bond fund of moderate duration.

In my opinion either option is going to work out just fine - the difference between the two will likely to end up being small enough to be lost in the noise of your investment returns. As such, I prefer bond funds because they are so much simpler to manage.

Michele in TX
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Michele in TX » Fri Jun 15, 2018 2:18 pm

Thanks Pajamas, JoMoney & Onourway for your notes. Much appreciated.

Onourway, could you recommend a way to compare past return rates of a (for instance) BND to a CD ladder? I know past returns aren't an indicator of future returns but I'd like to compare them anyway for an additional data point.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by lack_ey » Fri Jun 15, 2018 2:21 pm

Michele in TX wrote:
Fri Jun 15, 2018 1:54 pm
If I am looking for "debt" instruments to provide stability in my retirement funds why are bond funds better than a CD ladder, other than liquidity?
Other than liquidity, which seems like it shouldn't be dismissed, there are potentially higher returns from credit risk using bond funds, and some other risks that could be rewarded on average.
Michele in TX wrote:
Fri Jun 15, 2018 1:54 pm
Neither the BIV or the Vanguard Total Bond Fund ETF (BND) returns have kept up with inflation for the last 5 years.
Are you sure? I'm seeing trailing 5-year returns of 9.87% and 9.49% through yesterday for BIV and BND. The CPI-U inflation index went from 231.9 in May 2013 to 250.5 in May 2018, an increase of 8.04%. So it seems like the return was a bit larger than inflation (before taxes if applicable).


At times CDs are more attractive relative to bond funds than others. Generally if you compare to Treasury bonds of equivalent maturities and are getting a higher yield, then sure, this is an advantage (at the cost of liquidity/convenience). I've argued for CDs myself based on yield considerations.

CDs are a fine choice for a portion of fixed income.

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JoMoney
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by JoMoney » Fri Jun 15, 2018 2:25 pm

^ Keep in mind, the BND has a duration over 6 years ... you would need a CD ladder with a pretty long maturity to get close to something comparable to that.
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CountOnIt
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by CountOnIt » Fri Jun 15, 2018 2:26 pm

Michele in TX wrote:
Fri Jun 15, 2018 1:54 pm
see the bigger picture
I just want to remind people the role I-Bonds can play here in your portfolio. After the 1-year holding period they provide great liquidity and competitive returns. If you think inflation will go away during the next 5 years, then you'll be more interested in CD's, but I think having a portion of your risk-free funds protected against inflation (and receiving tax differed interest) would generally be advisable. I think people looking at CD ladders would benefit from thinking about the role I-Bonds can play.

You obviously can't make a big shift into them all at once ($10K/year/person), but if you have a spouse, you could acquire $40K exposure across the next 7 months.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by vineviz » Fri Jun 15, 2018 2:36 pm

Michele in TX wrote:
Fri Jun 15, 2018 1:54 pm
Where's the flaw in my logic in thinking a CD ladder will be a better investment than a bond fund?

This group has always helped me poke holes in my logic and see the bigger picture. Thanks.
CDs are, indeed, one of the most stable investments you can make. The provide a fixed rate of return, and the principal is federally insured.

In exchange for that stability, obviously you give up return: CDs will usually produce far lower returns than even a conservative bond fund like BIV or BND.

Look back to the summer of 2012, when Treasury yields were even lower than today. You could have purchased a five year CD then that yielded 1.1%, which might have seemed like a good deal.

But over that five year period BIV returned a total of 2.6 annually%, more than double the CD, and BND returned 1.97%. During that period of time, inflation averaged about 1.3% annually: CDs lost you money in real terms, while both bond funds produced a profit.

My advice: stick with your plan.You've still got decades of living to do, a period of time long enough for the bond funds to do their job.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

sport
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by sport » Fri Jun 15, 2018 2:43 pm

JoMoney wrote:
Fri Jun 15, 2018 2:10 pm
I don't think it is flawed. I have grown to have a preference for CDs over bond funds. I don't think "liquidity" is even a factor with CD's, you don't have to find someone to buy a CD you just cash it in with the bank. With some banks, you can do an early withdrawal from a CD via the banks online portal at 11pm on a Sunday night and withdraw it as cash at an ATM minutes later.... try that with a bond fund.
What you say is true only for direct CDs. Brokered CDs do not give you that liquidity. However, they generally give you a higher yield, and you do not have to be concerned about the bank automatically renewing them at some terribly low rate.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by onourway » Fri Jun 15, 2018 2:43 pm

Michele in TX wrote:
Fri Jun 15, 2018 2:18 pm
Onourway, could you recommend a way to compare past return rates of a (for instance) BND to a CD ladder? I know past returns aren't an indicator of future returns but I'd like to compare them anyway for an additional data point.
I don't know of a way to compare historical returns other than picking different points in time and looking at what a CD returned for that period vs. an investment in a bond fund at the same time. Generally the bond fund comes out ahead with some specific start/end dates otherwise. It's a general risk/return, and overall the market is extremely good at pricing these products appropriately. Sometimes there are exceptionally appealing CD rates that come available that tilt this - but this is not a sustainable long-term investment plan. If a great CD rate suddenly shows up where does the cash come from to fund it? You've either been sitting on cash that could have been invested, or you pay an early withdrawal penalty to get some cash out of an existing CD. Once you've funded the new CD there is no guarantee that there won't be a better rate next month or next year - or that when they mature there will be a good option to reinvest.

Remember that the stated yield on a CD is its total return. The stated yield on a bond fund is only part of its return - it may be higher or lower than that depending on the direction of interest rates, but generally, over the long term, the total return of a bond fund is greater than simply its yield. If rates do rise, your bond fund is automatically reinvesting at those new higher yields while your CD investments are locked in place.

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David Jay
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by David Jay » Fri Jun 15, 2018 2:46 pm

Individual Treasuries are a good alternative right now as well. They are available in a range of maturities, so you can buy a 3 year, 5 year, 7 year, etc.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Michele in TX
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Michele in TX » Fri Jun 15, 2018 2:50 pm

Hello Lack_ey. Nope. I am definitely not sure BIV / BND haven't kept up with inflation over the last 5 years. Thanks for the comment and I'll do a little more digging on that logic front. Your note helps me see a hole in my thinking - as do the posts from these other good folks.

I don't consider myself a sophisticated investor so I appreciate the tutoring from everyone a bunch.

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Meg77
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Meg77 » Fri Jun 15, 2018 2:50 pm

I'm a banker. The market for CDs has crumbled over the last decade, though people are starting to think about them again. It hasn't been worth locking into a CD because even the longer term ones haven't been paying more than a money market fund. The thing about CDs to remember is that they aren't priced based on supply and demand like other investments - they are priced by bank management based on the least amount the bank can pay in order to retain the deposit base they need to meet their loan demand.

Many banks are and have been so flush with demand deposits (those paying nothing or very little, like checking accounts) that they haven't needed to pay anything for money markets or even CDs. So they don't. As bond and money market yields at brokerage houses start to rise, this has begun to change. Some regional and smaller banks have begun jacking up money market yields (to 0.50% or 1% - not to 1.5%+ like you can find at Vanguard or Fidelity, etc.). Some are experimenting with some higher promotional CD rates, but often these are only available for "new money" - so people trying to maintain a CD latter end up having to spend a lot of time shopping rates and switching banks and opening new CDs every time one matures. If you're retired and have time, that's great. But it's a pain. And at least for now you're not likely to make more doing that than you can get in a bond fund or money market.

Here in Dallas the average 1 year CD across the banks we track is paying 0.62% (high of 1.5%, low of 0.30%). The average 5 year CD is paying 1.17% (high of 2.05%, low of 0.33%). The Vanguard money market currently beats all of the CDs we track at all banks across all time periods; these are mostly large regional banks but also include a couple of major national banks and a couple of smaller TX banks. (I'm sure there are smaller and start up banks paying a bit more, but usually those will have caps of $100k and other restrictions; the difference in dollar terms doesn't make it worth fooling with in my opinion, at least not until rates rise further).
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by sport » Fri Jun 15, 2018 2:54 pm

Meg77 wrote:
Fri Jun 15, 2018 2:50 pm
I'm a banker. The market for CDs has crumbled over the last decade, though people are starting to think about them again. It hasn't been worth locking into a CD because even the longer term ones haven't been paying more than a money market fund. The thing about CDs to remember is that they aren't priced based on supply and demand like other investments - they are priced by bank management based on the least amount the bank can pay in order to retain the deposit base they need to meet their loan demand.

Many banks are and have been so flush with demand deposits (those paying nothing or very little, like checking accounts) that they haven't needed to pay anything for money markets or even CDs. So they don't. As bond and money market yields at brokerage houses start to rise, this has begun to change. Some regional and smaller banks have begun jacking up money market yields (to 0.50% or 1% - not to 1.5%+ like you can find at Vanguard or Fidelity, etc.). Some are experimenting with some higher promotional CD rates, but often these are only available for "new money" - so people trying to maintain a CD latter end up having to spend a lot of time shopping rates and switching banks and opening new CDs every time one matures. If you're retired and have time, that's great. But it's a pain. And at least for now you're not likely to make more doing that than you can get in a bond fund or money market.

Here in Dallas the average 1 year CD across the banks we track is paying 0.62% (high of 1.5%, low of 0.30%). The average 5 year CD is paying 1.17% (high of 2.05%, low of 0.33%). The Vanguard money market currently beats all of the CDs we track at all banks across all time periods; these are mostly large regional banks but also include a couple of major national banks and a couple of smaller TX banks. (I'm sure there are smaller and start up banks paying a bit more, but usually those will have caps of $100k and other restrictions; the difference in dollar terms doesn't make it worth fooling with in my opinion, at least not until rates rise further).
Brokered CD rates are better. 2-year is available at 2.8%, 3-year at 3.0%, 5-year at 3.3%.

dbr
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by dbr » Fri Jun 15, 2018 3:04 pm

You are debating over two alternatives that are not different for the purpose. Don't waste time and energy over it.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Tycoon » Fri Jun 15, 2018 3:09 pm

Hey! Wait a minute! This guy has 10 million and he didn't go to an Ivy? What? How did that happen?

Oops! Wrong Thread. :?
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by AlwaysWannaLearn » Fri Jun 15, 2018 3:12 pm

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Last edited by AlwaysWannaLearn on Wed Jul 18, 2018 11:40 pm, edited 1 time in total.

Michele in TX
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Michele in TX » Fri Jun 15, 2018 3:14 pm

Very helpful posts, everyone. Meg, thanks for your thoughts from a banker's perspective. I

know I'm not spectacular at this so I appreciate everybody's comments and hopefully this thread will help other "novices" too.

Michele in TX
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Michele in TX » Fri Jun 15, 2018 3:16 pm

AlwaysWannaLearn - the CD ladder would be in my retirement fund - same place as my BIV fund. And yes, good point - the 4 years of cash will be used over the next 4 years for my expenses.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by alex_686 » Fri Jun 15, 2018 3:18 pm

Michele in TX wrote:
Fri Jun 15, 2018 1:54 pm
Where's the flaw in my logic in thinking a CD ladder will be a better investment than a bond fund?
What is logic for?

I will point out that bonds are a class of bonds, and if you own 2 or more CDs than you have got yourself a bond fund. :happy

I will also point out that many people confuse the control and certainty of CDs as a reduction of risk. It is not. A bond ladder carries the same risk as a bond fund with a similar duration. First, CDs are not marketed to market so it appears that they have lower risk - but in reality you are just closing your eyes. Second, bonds carry principle risk and interest rate risk. Reduce risk on one side and it will just increase on the other. I assume you are going to reinvest your CDs as they mature, that reinvestment risk is a form of interest rate risk.

I am not saying that CDs are bad, just that they are not magic.

Michele in TX
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Michele in TX » Fri Jun 15, 2018 3:30 pm

Don't know if this will help anyone but I just called Vanguard to ask a related question and the rep showed me how to find the "Financial Advisors" section on the Vanguard website. It's in the pull-down menu in the top left section of the page (click on "Financial Advisors" instead of "Personal Investors"). Then I went to BIV page and looked at the cumulative returns information for BIV. I didn't know this whole other area of the website was available. Thanks again Lack_ey.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by AlwaysWannaLearn » Fri Jun 15, 2018 3:51 pm

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Last edited by AlwaysWannaLearn on Wed Jul 18, 2018 11:38 pm, edited 2 times in total.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Cyclesafe » Fri Jun 15, 2018 4:09 pm

For several years I have been transitioning from a primarily secondary brokered CD ladder to muni bond funds. It has taken me a great deal of time to get my heart around the fact that "price to market", dependent (in part) on relative durations, for the ladder and the muni funds are equivalent on a risk adjusted basis. But this is not easily quantifiable and I don't even try.

For me, freeing up taxable interest income space gives me an opportunity to convert a bit more t-IRA to Roth. IOW's the taxable equivalent return on the muni funds become a function of my next higher (not breached) federal and state tax brackets.

Michele in TX
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Michele in TX » Fri Jun 15, 2018 4:20 pm

My goodness, Bogleheads.org really is a wonderful group of folks. I just realized I likely should have asked this question in the "help with investments" section of the website. I'm sorry. I didn't mean to break the rules. I'll end my comments after this note. My apologies everyone.

AlwaysWannaLearn - what a good point you make about 4 years being a lot to hold in cash. I spoke with a Vanguard advisor earlier today and she said something along the same lines. I need to think about that.

Everyone's posts this afternoon reminds me how thankful I am to have this as my problem to solve. I'm odd as a "saver / investor" - the volatility in my retirement stock funds (50% Total Stock Market ETF- VTI & 10% Total International Stock Market - VXUS) don't bother me. But the low 1 yr and YTD returns for BIV (40% of retirement funds) do. My logic is "wait a minute, this is supposed to be a stable fund and not have negative returns." I know that's not wise - just honest. As a I read in a recent investment column, it's important to know your time horizon then not get flustered by every little turn in the road.

Thanks everyone for your help and as we used to say about the old party phone line system - I'll get off the line now....

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Dandy » Fri Jun 15, 2018 8:15 pm

Why all or nothing. Each fixed income product has certain pros and cons. e.g. Bond funds have better liquidity -- for emergencies or rebalancing for example. CDs have a known interest rate and maturity date and a government guarantee but are less liquid. A short term Treasury fund avoids state income taxes but has a lower yield.

The point is if your fixed income is for stability sometimes a variety of fixed income choices can offer more stability/safety than a single bond fund"s simplicity and reasonable stability.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Kevin M » Fri Jun 15, 2018 8:23 pm

I'm not going to suggest what you should do, but I want to correct some misleading information that's been shared in this thread.
vineviz wrote:
Fri Jun 15, 2018 2:36 pm
Look back to the summer of 2012, when Treasury yields were even lower than today. You could have purchased a five year CD then that yielded 1.1%, which might have seemed like a good deal.
In mid-May 2012 I bought a 5-year CD with an APY of 2.25%, so far higher yield than 1.1%. At the time the 5-year Treasury was 0.78%, so my yield premium was about 1.5 percentage points (150 basis points). So I was guaranteed to earn 1.5 percentage points more per year than a comparably safe fixed-income investment held to maturity, and I did.
But over that five year period BIV returned a total of 2.6 annually%, more than double the CD, and BND returned 1.97%. During that period of time, inflation averaged about 1.3% annually: CDs lost you money in real terms, while both bond funds produced a profit.
With these funds you are taking credit risk and more term risk than with the CD. Sometimes these risks might be rewarded, and sometimes not.

From May 2012 through Apr 2017 BND had an annualized return of 2.02%, so for this particular time period the extra risk in this particular fund was not particularly well rewarded, and the safer CD earned more with less risk. BIV did earn more, so the extra risk in this fund was rewarded relative to the CD over this particular 5-year period.

However, whether or not the CD earned more than BND (or BIV) is confusing strategy with outcome, so I would have been satisfied regardless. The CD provided an exceptional yield premium to a Treasury of the same maturity, so I knew at the time that the strategy made sense for me in terms of the risk/expected-return tradeoff.

Still, for those who like to praise bond funds when they happen to outperform CDs, let's look at a more recent example. My most recently matured CD was a 5-year CD bought in May of 2013 at an APY of 2.0%, when the 5-year Treasury yield was 0.85%. So the yield premium was not as excellent as the previous example, but still a healthy 115 basis points over the Treasury of same maturity. Again, I knew I would earn significantly more than the fixed-income alternative with no credit risk and the same maturity (the CD actually had significantly less term risk due to the early withdrawal option, but we can put that aside for this discussion), so I knew the strategy made sense for me, regardless of how an intermediate-term bond fund with more risk performed over the next five years.

As it turned out, BND return for May 2013 through April 2018 was 1.35%, so the CD outperformed BND over this particular 5-year period by even more. And in this case the extra risk of BIV showed up instead of being rewarded, and BIV earned only 1.25% over this 5-year period, so the CD beat it by an even larger margin.

Again, here I'm just correcting what I consider to be misleading information, since the yield premiums of CDs over Treasuries today are not nearly as rich as they have been in previous years, and today I am following a different strategy with CDs than I was then.
Meg77 wrote:
Fri Jun 15, 2018 2:50 pm
I'm a banker. The market for CDs has crumbled over the last decade, though people are starting to think about them again. It hasn't been worth locking into a CD because even the longer term ones haven't been paying more than a money market fund.
Meg77 may be a banker, but the rest of the statements are completely false, assuming you were buying competitive CDs rather than CDs from banks like Meg77's. I was buying direct CDs (purchased directly from a bank or credit union) from late 2010 through late 2016 (and posting profusely about it here, so it was no secret), and my average yield premium over Treasuries of same maturity was about 115 basis points. And as shown in a previous example, some with yield premiums as high as 150 basis points (my highest was actually 216 basis points--a 3-year CD at 3.05% when 3-year Treasury yield was 0.89%).

The yield premiums were much richer during those years than they are now, so I don't know why someone who really knew what was going on would be thinking about CDs now if they weren't then.

Although the yield premiums generally aren't as rich, a rich nugget does appear now and then. One of the credit unions at which I had a couple of 2.7% CDs recently offered a 5-year CD at 4.2% (a yield premium of 138 basis points with the 5-year Treasury at 2.82%). With the amount of time left to maturity, the early withdrawal penalty (EWP) of six months of interest (about 1.35%) would have been well worth paying to get the higher yield, and I was ready to do it. Turns out that this particular CU is one that waives the EWP for IRA CDs if you are age 59 1/2 or older, so I didn't even have to pay the penalty! This is a partial answer to "where does the money come from to buy these good CDs when they become available?"

I am not the only one on the forum who has taken advantage of no-EWP IRA CDs to get into a great CD deal when it comes along. Another forum member took advantage of the same no-EWP policy at PenFed to do a penalty-free swap from a 3% CD to the 4.2% CD.
Meg77 wrote:
Fri Jun 15, 2018 2:50 pm
Here in Dallas the average 1 year CD across the banks we track is paying 0.62% (high of 1.5%, low of 0.30%). The average 5 year CD is paying 1.17% (high of 2.05%, low of 0.33%). The Vanguard money market currently beats all of the CDs we track at all banks across all time periods; these are mostly large regional banks but also include a couple of major national banks and a couple of smaller TX banks. (I'm sure there are smaller and start up banks paying a bit more, but usually those will have caps of $100k and other restrictions; the difference in dollar terms doesn't make it worth fooling with in my opinion, at least not until rates rise further).
These rates are just pitiful, and these definitely are not the CDs you want to be considering in the current market.

The new-issue 2-year CD rate at Fidelity and Vanguard has been at 2.80% for a couple of weeks now, and I regularly have been able to get 2.85% net (after commission) on the secondary market. The 3-year new issue yield has been at 3.00%, and I have consistently been able to beat that on the secondary market; yesterday I bought some of a 31-month brokered CD at Fidelity with a net yield of 3.05%, so higher yield and five months less maturity than the new-issue 3-year CD.

In the current environment, you get a large yield premium for extending brokered-CD maturity to two years. Comparing to Vanguard Prime money market as the 0-year yield at 1.97%, in at tax-advantaged account a 2-year CD at 2.8% or 2.85% gives you more than 40 basis points of extra yield per extra year of maturity, which is twice a common guideline of 20 bps/year. And even though not as rich as in recent years, the 2-year CD at 2.85% still provides a yield premium of about 30 basis points over the 2-year Treasury at 2.55% (and probably more unless you are buying $100,000 or more at a time, since you sacrifice some yield for smaller quantities of Treasuries).

Meg77's comments about having to switch banks or credit unions to get competitive yields when your CDs mature can be true. This really isn't much of a problem in taxable accounts, since it's fairly quick and easy to open a new account, but it is more of a pain with IRAs, which require more paperwork and time to get the transfer done.

However, in the current environment, I'm mostly transferring proceeds of maturing IRA CDs to Fidelity to buy brokered CDs, so actually simplifying my CD portfolio. It doesn't take long to fill out the Fidelity transfer form online, print it, and mail it, and you can do it a few weeks before the CD at the bank or CU matures, so you don't have much dead money time (my last one arrived at Fidelity three business days after the CD matured).

In a taxable account Treasuries might provide a higher taxable-equivalent yield if you pay state income tax--they do for me--so I'm not wedded to CDs. However, the Treasury yield curve is very steep at the short end--out to about 1-year maturity, and flattens out quite a bit after that, so I currently am keeping Treasury maturity in taxable to one year or less. I plan to enter orders for some of the 6-month and 1-year this weekend for the auctions next week.

Kevin
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Austintatious » Fri Jun 15, 2018 9:04 pm

OP,

here's a 2013 article from Harry Sit's blog "The Finance Buff" discussing much the same question you ask - whether CDs were "better" than bonds, at least for that time. I think his analysis applies quite well in today's savings/investing environment and that it nicely compliments your suggestion that CDs may be the "better" FI investment. See what you think.

https://thefinancebuff.com/why-investor ... bonds.html

And here's the last portion of the text:
For people who really understand what’s going on, there’s little reason not to use CDs for the bulk of fixed income investments (except munis in taxable accounts). Even for TIPS for inflation protection, we have CD-like I Bonds as a better alternative. To recap,

Bonds and CDs are not mutually exclusive. You can have both.
Bonds used to be better than CDs but no longer.
Bonds are better than average CDs but the best CDs you can easily find are better than bonds.
CDs can be used for long-term investing as well as short-term savings.
You don’t need to keep 100% of your money liquid 100% of the time. Don’t pay for liquidity you don’t need.
Having another account is not going to kill you. It’s good for your bottom line.
It’s very easy to transfer money to a bank or credit union for CDs, even in an IRA.

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Ricchan
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Ricchan » Fri Jun 15, 2018 10:34 pm

Kevin M wrote:
Fri Jun 15, 2018 8:23 pm
Meg77 wrote:
Fri Jun 15, 2018 2:50 pm
Here in Dallas the average 1 year CD across the banks we track is paying 0.62% (high of 1.5%, low of 0.30%). The average 5 year CD is paying 1.17% (high of 2.05%, low of 0.33%). The Vanguard money market currently beats all of the CDs we track at all banks across all time periods; these are mostly large regional banks but also include a couple of major national banks and a couple of smaller TX banks. (I'm sure there are smaller and start up banks paying a bit more, but usually those will have caps of $100k and other restrictions; the difference in dollar terms doesn't make it worth fooling with in my opinion, at least not until rates rise further).
These rates are just pitiful, and these definitely are not the CDs you want to be considering in the current market.

The new-issue 2-year CD rate at Fidelity and Vanguard has been at 2.80% for a couple of weeks now, and I regularly have been able to get 2.85% net (after commission) on the secondary market. The 3-year new issue yield has been at 3.00%, and I have consistently been able to beat that on the secondary market; yesterday I bought some of a 31-month brokered CD at Fidelity with a net yield of 3.05%, so higher yield and five months less maturity than the new-issue 3-year CD.
I'm going to elaborate on the various "tiers" of CD rates, since I recently went through the process of delving into CDs myself and, looking back, wish someone would've explained this to me back then.

It seems Meg77 is only considering CDs from retail banks that have branch locations in the Dallas area. In general, any CDs offered by retail banks with physical branch locations, no matter where you live, will have pitiful rates (as Kevin mentioned). Avoid these CDs.

Online banks like Capital One, Ally, Synchrony, Marcus, etc. offer somewhat decent CD rates, though they are usually a bit lower than brokered CD rates. On rare occasions a very good CD offer may appear, such as the 2.35% 14 month CD from Synchrony that was offered a little over a month ago when the highest 12 month brokered CD was 2.20%. One thing to be wary of, however, is these banks will by default roll your CD at maturity into a new CD with the same term but (usually) a much less competitive rate, unless you tell them otherwise. Some banks make it easy to change maturity options, while others try to make it difficult or confusing. You need to stay on top of this yourself.

Brokered CDs are offered by brokerages like Vanguard or Fidelity which serve as a middleman between you and the banks that actually issue the CDs. Oftentimes these will be the same banks that try to sell lower CD rates through their physical branch locations, which is kind of funny. In any case, your broker will offer you a list of CDs offered by various banks, and you simply pick the CD with the highest rate for the term you're interested in. If you are looking for, say, a 2 year CD, you can either browse the list of new 2 year CDs being offered at the moment, or you can search for used CDs, which were issued some time in the past but have a maturity date that is ~2 years out from today. Used CDs usually offer slightly higher rates (e.g. 10-20 bp at the moment) than new CDs. When a brokered CD matures, the balance automatically goes into your settlement fund.

Lastly, I've been personally tracking CD rates as well as savings / money market rates from various banks over the past month or so, mainly out of curiosity. This data might be interesting to people who are looking into this topic, so I thought I'd share it here. These are simply banks that I'm personally interested in, so apologies if your choice of bank isn't in this list.

Code: Select all

		Savings / Money Markets						12 month CD					14 m	24 month CD					36 month CD					60 month CD
Date		Ally 	CIT 	CO 	Disc 	Marcus 	Sync 	VGPrime	VGMuni	Ally	CO	Disc	Marcus	Sync	VG	Sync	Ally	CO	Disc	Marcus	Sync	VG 	Ally	CO	Disc	Marcus	Sync	VG 	Ally	CO	Disc	Marcus	Sync	VG
5/5/2018	1.50%	1.75%	1.60%	1.50%	1.60%	1.65%	1.82%	1.48%	2.10%	2.10%	2.00%	2.20%	2.15%		2.35%	2.15%	2.25%	2.10%	2.30%	2.25%		2.30%	2.35%	2.25%	2.35%	2.35%		2.60%	2.75%	2.50%	2.80%	2.60%
5/12/2018	1.60%	1.75%	1.60%	1.50%	1.60%	1.65%	1.85%	1.40%	2.25%	2.10%	2.00%	2.20%	2.15%	2.20%	2.35%	2.35%	2.25%	2.10%	2.30%	2.25%	2.75%	2.50%	2.35%	2.25%	2.35%	2.35%	2.90%	2.60%	2.75%	2.50%	2.80%	2.60%	3.20%
5/19/2018	1.60%	1.75%	1.60%	1.55%	1.70%	1.65%	1.86%	1.33%	2.25%	2.25%	2.10%	2.20%	2.15%	2.25%	2.35%	2.35%	2.35%	2.20%	2.30%	2.25%	2.75%	2.50%	2.40%	2.35%	2.35%	2.35%	3.00%	2.60%	2.80%	2.60%	2.80%	2.60%	3.20%
5/26/2018	1.60%	1.85%	1.60%	1.60%	1.70%	1.65%	1.88%	1.22%	2.25%	2.25%	2.10%	2.20%	2.25%	2.25%	2.35%	2.35%	2.35%	2.20%	2.30%	2.45%	2.80%	2.50%	2.40%	2.35%	2.35%	2.55%	3.00%	2.60%	2.80%	2.60%	2.80%	2.85%	3.25%
6/2/2018	1.60%	1.85%	1.60%	1.60%	1.70%	1.65%	1.91%	1.10%	2.25%	2.25%	2.10%	2.20%	2.25%	2.30%	2.35%	2.35%	2.35%	2.20%	2.30%	2.45%	2.80%	2.50%	2.40%	2.35%	2.35%	2.55%	3.00%	2.60%	2.80%	2.60%	2.80%	2.85%	3.25%
6/9/2018	1.60%	1.85%	1.60%	1.60%	1.70%	1.75%	1.93%	1.03%	2.25%	2.25%	2.10%	2.20%	2.25%	2.30%	2.35%	2.35%	2.35%	2.20%	2.30%	2.45%	2.80%	2.50%	2.40%	2.35%	2.35%	2.55%	3.00%	2.60%	2.80%	2.60%	2.80%	2.85%	3.30%
6/15/2018	1.65%	1.85%	1.60%	1.65%	1.70%	1.75%	1.96%	1.07%	2.30%	2.25%	2.25%	2.30%	2.25%	2.30%	2.35%	2.35%	2.35%	2.30%	2.45%	2.45%	2.80%	2.50%	2.40%	2.45%	2.55%	2.55%	3.00%	2.75%	2.80%	2.75%	2.90%	2.85%	3.30%
(My shorthand: CO = Capital One, Disc = Discover, Sync = Synchrony, VGPrime = Vanguard VMMXX, VGMuni = Vanguard VMSXX)
(VG = Highest new brokered CD I could find on Vanguard at the time. I forgot to record the first week.)

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by jeffyscott » Fri Jun 15, 2018 10:49 pm

Kevin M wrote:
Fri Jun 15, 2018 8:23 pm
The yield premiums were much richer during those years than they are now, so I don't know why someone who really knew what was going on would be thinking about CDs now if they weren't then.
I'm one who wasn't but is now. I did not really have the ability to conveniently put much in direct bank CDs, anyway. Over the last several years, I went with savings accounts that had been at ~1% and I-bonds for the small amount of taxable savings we have.

I also had a stable value fund as a bond alternative and that bottomed out around 1.8%, which had seemed pretty good (but is now only around 2.2%). I was previously vaguely aware of brokered CDs, but had no idea that the yields were so much higher than online banks (I quite recently learned of this fact from you, thanks).
press on, regardless - John C. Bogle

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Sandtrap » Fri Jun 15, 2018 11:02 pm

Not "instead'. . .
Do both concurrently in varying degrees of liquidity.
1 Cash, high yield accounts.
2 CD ladder
4 Bond Funds

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Sandtrap » Fri Jun 15, 2018 11:04 pm

jeffyscott wrote:
Fri Jun 15, 2018 10:49 pm
Kevin M wrote:
Fri Jun 15, 2018 8:23 pm
The yield premiums were much richer during those years than they are now, so I don't know why someone who really knew what was going on would be thinking about CDs now if they weren't then.
I'm one who wasn't but is now. I did not really have the ability to conveniently put much in direct bank CDs, anyway. Over the last several years, I went with savings accounts that had been at ~1% and I-bonds for the small amount of taxable savings we have.

I also had a stable value fund as a bond alternative and that bottomed out around 1.8%, which had seemed pretty good (but is now only around 2.2%). I was previously vaguely aware of brokered CDs, but had no idea that the yields were so much higher than online banks (I quite recently learned of this fact from you, thanks).
Brokered CD's. New issue. (secondary rates vary)
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by stlutz » Fri Jun 15, 2018 11:14 pm

BIV is a fine investment, so are CDs. Since nobody else has done it, I'm going to speak up in favor of just sticking with BIV.

Unlike with a direct CD, a bond fund will flutuate in price. But, when it drops in price it gets made up for over time by a higher yield. So, BIV has suffered a bit from the increase in interest rates over the past year or so. But over the longer term, that is good for you--the higher yield will payoff more over time than the shorter-term drop in price.

I don't know which will ultimately perform better over the course of your retirement. But I would ask yourself about the degree to which you want to shop for CD rates at different banks over time. Some people here enjoy doing it. But if your goal is to keep your investing simple, I'd just stick with BIV and sleep well at night knowing that you've made an excellent, low cost choice that should serve you well over time.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Leif » Fri Jun 15, 2018 11:54 pm

I have bonds funds in my retirement accounts. However, in taxable I have a 5 year CD ladder. I've set it up to provide cash between retirement and RMDs at 70.

Each year some CDs will mature and I will use that to replenish my cash holdings. If I have left over cash, which I expect, I'll either roll it over to a new 5 year CD (if the term/rates make sense) or add it to an intermediate term muni fund. After 70 I'm more inclined to use the muni fund since once RMDs start, and SS@70 as well, I have less need of cash from matured CDs and I'm more concerned with taxes.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by vineviz » Sat Jun 16, 2018 7:05 am

Kevin M wrote:
Fri Jun 15, 2018 8:23 pm
In mid-May 2012 I bought a 5-year CD with an APY of 2.25%, so far higher yield than 1.1%.
In the summer of 2012, 1.1% was the national average yield for 5-year CDs. It's a data point that can easily be verified by looking it up, just as I did before I posted it.
Kevin M wrote:
Fri Jun 15, 2018 8:23 pm
At the time the 5-year Treasury was 0.78%, so my yield premium was about 1.5 percentage points (150 basis points). So I was guaranteed to earn 1.5 percentage points more per year than a comparably safe fixed-income investment held to maturity, and I did.
You were certainly guaranteed to earn the yield promised on your CD. However, you had no way in 2012 of knowing what the total return of any bond fund over the next five years would be.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Lloydo » Sat Jun 16, 2018 7:20 am

Leif wrote:
Fri Jun 15, 2018 11:54 pm
I have bonds funds in my retirement accounts. However, in taxable I have a 5 year CD ladder. I've set it up to provide cash between retirement and RMDs at 70.

Each year some CDs will mature and I will use that to replenish my cash holdings. If I have left over cash, which I expect, I'll either roll it over to a new 5 year CD (if the term/rates make sense) or add it to an intermediate term muni fund. After 70 I'm more inclined to use the muni fund since once RMDs start, and SS@70 as well, I have less need of cash from matured CDs and I'm more concerned with taxes.
May be a silly question, but why hold the CD’s in taxable? You could sell equities in taxable to fund living expenses and rebalance your equity allocation in tax deferred by selling bond funds.

Just wondering.

Lloyd

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Greg in Idaho » Sat Jun 16, 2018 8:15 am

onourway wrote:
Fri Jun 15, 2018 2:11 pm
In my opinion either option is going to work out just fine - the difference between the two will likely to end up being small enough to be lost in the noise of your investment returns. As such, I prefer bond funds because they are so much simpler to manage.
This is about where I'm at...and while you can get away without taking a ton of time tending the ladder, there is matter of being on the lookout for the best rates and I don't enjoy shopping for CD's and wondering if I could have done better...

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by jeffyscott » Sat Jun 16, 2018 8:52 am

Greg in Idaho wrote:
Sat Jun 16, 2018 8:15 am
onourway wrote:
Fri Jun 15, 2018 2:11 pm
In my opinion either option is going to work out just fine - the difference between the two will likely to end up being small enough to be lost in the noise of your investment returns. As such, I prefer bond funds because they are so much simpler to manage.
This is about where I'm at...and while you can get away without taking a ton of time tending the ladder, there is matter of being on the lookout for the best rates and I don't enjoy shopping for CD's and wondering if I could have done better...
You don't have to chase after every basis point (like Kevin :wink: ). OTOH, you don't really have to shop around, as Kevin and others here will do that for you :D .

Anyway, I am planning to keep it simple. I'll sign on to brokerage account and buy one new issue 3 year CD and one 2 year about every 4 months for the next year and then switch to just buying a 3 year (duration subject to change, based on the interest rates offered). I am not going to transfer IRA accounts around to different banks or rummage through the secondary market or multiple brokerages.

Does not seem like any more trouble than buying bond ETFs, instead of bond mutual funds? I have no idea why so many seem to be doing that, adding the extra step of needing to check for premiums/discounts and any other complications that ETFs may add to the process.

I will also use bond mutual funds, but to the extent possible I want to avoid including US government bonds in the funds.
press on, regardless - John C. Bogle

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by munemaker » Sat Jun 16, 2018 8:56 am

Michele in TX wrote:
Fri Jun 15, 2018 3:30 pm
Don't know if this will help anyone but I just called Vanguard to ask a related question and the rep showed me how to find the "Financial Advisors" section on the Vanguard website. It's in the pull-down menu in the top left section of the page (click on "Financial Advisors" instead of "Personal Investors"). Then I went to BIV page and looked at the cumulative returns information for BIV. I didn't know this whole other area of the website was available. Thanks again Lack_ey.
Did you have to register to use this section of the website?

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Leif » Sat Jun 16, 2018 9:59 am

Lloydo wrote:
Sat Jun 16, 2018 7:20 am
May be a silly question, but why hold the CD’s in taxable? You could sell equities in taxable to fund living expenses and rebalance your equity allocation in tax deferred by selling bond funds.

Just wondering.

Lloyd
Not a silly question.

1. I did sell some equities in taxable, over several years, since I wanted to reduce equity in prep for retirement (did not want to rebalance). I had a lot of capital losses from TLH in the great recession, which I used when selling the stock. No taxes involved.

2. From this cash I built my ladder. I felt it was safer to have a CD ladder rather than selling equity as I go from retirement to RMDs. In my mind this needed to be my safe money.

3. Given how the stock market has gone up your plan would have been better (so far). Unfortunately my crystal ball has never worked very well and I've not been able to fix it. But, at least I've been sleeping very well.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Austintatious » Sat Jun 16, 2018 1:04 pm

CountOnIt wrote:
Fri Jun 15, 2018 2:26 pm
Michele in TX wrote:
Fri Jun 15, 2018 1:54 pm
see the bigger picture
I just want to remind people the role I-Bonds can play here in your portfolio. After the 1-year holding period they provide great liquidity and competitive returns. If you think inflation will go away during the next 5 years, then you'll be more interested in CD's, but I think having a portion of your risk-free funds protected against inflation (and receiving tax differed interest) would generally be advisable. I think people looking at CD ladders would benefit from thinking about the role I-Bonds can play.

You obviously can't make a big shift into them all at once ($10K/year/person), but if you have a spouse, you could acquire $40K exposure across the next 7 months.
I have to think CountOnIt is right, here. I bonds, with their inflation protection, look to be a really good alternative for what the OP is contemplating, even if they'll only accommodate part of the funds intended for her CD ladder.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Lloydo » Sat Jun 16, 2018 1:17 pm

Lloydo wrote:
Sat Jun 16, 2018 7:20 am
Leif wrote:
Fri Jun 15, 2018 11:54 pm
I have bonds funds in my retirement accounts. However, in taxable I have a 5 year CD ladder. I've set it up to provide cash between retirement and RMDs at 70.

Each year some CDs will mature and I will use that to replenish my cash holdings. If I have left over cash, which I expect, I'll either roll it over to a new 5 year CD (if the term/rates make sense) or add it to an intermediate term muni fund. After 70 I'm more inclined to use the muni fund since once RMDs start, and SS@70 as well, I have less need of cash from matured CDs and I'm more concerned with taxes.
May be a silly question, but why hold the CD’s in taxable? You could sell equities in taxable to fund living expenses and rebalance your equity allocation in tax deferred by selling bond funds.

Just wondering.

Lloyd
I probably would have done the same if I needed/wanted to reduce equity %. I’m about 3 years from beginning withdrawal at 61 or so and am at 50/50 equity/FI with the same split between taxable and tax deferred. So in my case I think I’ll fund living expenses by selling equities in taxable and rebalance back to 50/50 by selling FI and buying equities in tax deferred. Make sense?

Thanks.

Lloyd

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by dbr » Sat Jun 16, 2018 1:23 pm

Lloydo wrote:
Sat Jun 16, 2018 1:17 pm
Lloydo wrote:
Sat Jun 16, 2018 7:20 am
Leif wrote:
Fri Jun 15, 2018 11:54 pm
I have bonds funds in my retirement accounts. However, in taxable I have a 5 year CD ladder. I've set it up to provide cash between retirement and RMDs at 70.

Each year some CDs will mature and I will use that to replenish my cash holdings. If I have left over cash, which I expect, I'll either roll it over to a new 5 year CD (if the term/rates make sense) or add it to an intermediate term muni fund. After 70 I'm more inclined to use the muni fund since once RMDs start, and SS@70 as well, I have less need of cash from matured CDs and I'm more concerned with taxes.
May be a silly question, but why hold the CD’s in taxable? You could sell equities in taxable to fund living expenses and rebalance your equity allocation in tax deferred by selling bond funds.

Just wondering.

Lloyd
I probably would have done the same if I needed/wanted to reduce equity %. I’m about 3 years from beginning withdrawal at 61 or so and am at 50/50 equity/FI with the same split between taxable and tax deferred. So in my case I think I’ll fund living expenses by selling equities in taxable and rebalance back to 50/50 by selling FI and buying equities in tax deferred. Make sense?

Thanks.

Lloyd
Of course it does. Holding fixed income buckets to support spending is just a question of whether or not you think messing with your asset allocation can be done to some specific advantage. It takes a lot of proving to show that. The dynamic is that decreased risk in the asset allocation also results in less expected return. While the first benefits the longevity of the portfolio the second reduces the supportable spending. So now you have to find an analysis that reaches out to second and third order effects to find an advantage and the advantage has to be meaningfully large.

In the meantime tax efficiency is always tax efficiency.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by billthecat » Sat Jun 16, 2018 3:05 pm

CountOnIt wrote:
Fri Jun 15, 2018 2:26 pm
Michele in TX wrote:
Fri Jun 15, 2018 1:54 pm
see the bigger picture
You obviously can't make a big shift into them all at once ($10K/year/person), but if you have a spouse, you could acquire $40K exposure across the next 7 months.
Isn't it really $15k/year/person, if you game it right? That is, $10k electronic and $5k paper via a tax refund? And gaming it by withholding too much, so you are entitled to at least a $5k refund? Looking for verification on all that.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Leif » Sat Jun 16, 2018 4:29 pm

Lloydo wrote:
Sat Jun 16, 2018 1:17 pm
I probably would have done the same if I needed/wanted to reduce equity %. I’m about 3 years from beginning withdrawal at 61 or so and am at 50/50 equity/FI with the same split between taxable and tax deferred. So in my case I think I’ll fund living expenses by selling equities in taxable and rebalance back to 50/50 by selling FI and buying equities in tax deferred. Make sense?
I assume your reply and question were directed to me.

I see your thinking. Regardless of the market going up or down then a counterbalance in tax deferred will compensate. Plus LT capital gains/qualified dividends are to be preferred to CD interest for taxes, although less predictable.

I'm trying on hold to appreciated equities in taxable for inheritance purposes.

Many different roads to Dublin.
Last edited by Leif on Sat Jun 16, 2018 4:48 pm, edited 1 time in total.

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Re: Flaw in Logic? CD ladder instead of bond funds

Post by AlphaLess » Sat Jun 16, 2018 4:45 pm

Meg77 wrote:
Fri Jun 15, 2018 2:50 pm
Many banks are and have been so flush with demand deposits (those paying nothing or very little, like checking accounts) that they haven't needed to pay anything for money markets or even CDs
This! Golden.

So there is so much money on the sidelines, it is hard to imagine.
BofA
Chase
Citi
WellsFargo

are sitting on trillions of deposits.
Not to mentioned the smaller fish and shrimp out there.

A lot of the deposits are 10k here, 20k there, per customer.
But there must be bigger depositors as well.

I think around 2007 or 2008, there were something like 6%, 7% 5 and 7 year CDs.
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by AlphaLess » Sat Jun 16, 2018 5:05 pm

Kevin M wrote:
Fri Jun 15, 2018 8:23 pm
I'm not going to suggest what you should do, but I want to correct some misleading information that's been shared in this thread.
...
Kevin
Good post, thanks for sharing.
Is there a thread or section here at bogleheads focusing on CDs?
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by VictoriaF » Sat Jun 16, 2018 5:11 pm

AlphaLess wrote:
Sat Jun 16, 2018 5:05 pm
Kevin M wrote:
Fri Jun 15, 2018 8:23 pm
I'm not going to suggest what you should do, but I want to correct some misleading information that's been shared in this thread.
...
Kevin
Good post, thanks for sharing.
Is there a thread or section here at bogleheads focusing on CDs?
If you search for Kevin M's posts you will find many excellent comments about CDs. Some of them could be in the threads that are not directly about CDs but where CDs are an alternative to something else.

Victoria
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by Kevin M » Sat Jun 16, 2018 5:12 pm

AlphaLess wrote:
Sat Jun 16, 2018 4:45 pm
Meg77 wrote:
Fri Jun 15, 2018 2:50 pm
Many banks are and have been so flush with demand deposits (those paying nothing or very little, like checking accounts) that they haven't needed to pay anything for money markets or even CDs
This! Golden.

So there is so much money on the sidelines, it is hard to imagine.
BofA
Chase
Citi
WellsFargo

are sitting on trillions of deposits.
Interestingly, Wells Fargo has pretty consistently been among those offering the highest 2-year and 3-year brokered CDs rates lately. As someone mentioned earlier, some of these banks offer good rates on brokered CDs, but terrible rates for CDs sold directly to customers. They currently offer a 3-year brokered CD at 3.00%, while I see a 39-month direct CD at 1.20% APY for the "bonus" CD.

Kevin
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Re: Flaw in Logic? CD ladder instead of bond funds

Post by AlphaLess » Sat Jun 16, 2018 5:13 pm

VictoriaF wrote:
Sat Jun 16, 2018 5:11 pm
AlphaLess wrote:
Sat Jun 16, 2018 5:05 pm
Kevin M wrote:
Fri Jun 15, 2018 8:23 pm
I'm not going to suggest what you should do, but I want to correct some misleading information that's been shared in this thread.
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Kevin
Good post, thanks for sharing.
Is there a thread or section here at bogleheads focusing on CDs?
If you search for Kevin M's posts you will find many excellent comments about CDs. Some of them could be in the threads that are not directly about CDs but where CDs are an alternative to something else.

Victoria
Thanks!
"You can get more with a kind word and a gun than with just a kind word." George Washington

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