Penn Fed 3% 5 year CD's 30% penalty if early withdraw

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cpumechanic
Posts: 95
Joined: Tue Dec 21, 2010 11:42 pm

Penn Fed 3% 5 year CD's 30% penalty if early withdraw

Post by cpumechanic » Tue Jul 10, 2018 3:58 pm

Hi

Got an email today from Penfed.. searched and did not find anyone else talking about this.
Minimum investment 1000, could not easily locate maximum allowed.
The penalty for early withdraw is 30% of the total amount that would have been earned if you left all funds in for full period.
They do indicate that they only remove earnings or potential earnings, not principle if I read this correctly.

The early withdraw penalty seems a little harsh to me.

Here is some fine print from the application
=================================================
a) If redeemed within the frst year, all dividends
will be forfeited.
b) If redeemed thereafter, but prior to the maturity
date, the early withdrawal penalty will equal 30%
of what would have been earned if the certifcate
had been held to maturity, not to exceed total
dividends earned
3) Exceptions. The penalties described above
will not be applied if the redemption is made:
a) Subsequent to the death of any holder of the
certifcate;
b) As a result of the voluntary or involuntary
liquidation of the credit union.
=================================================

Is this a good deal?

CPU
We either make ourselves miserable, or we make ourselves strong. The amount of work is the same.

grok87
Posts: 8379
Joined: Tue Feb 27, 2007 9:00 pm

Re: Penn Fed 3% 5 year CD's 30% penalty if early withdraw

Post by grok87 » Tue Jul 10, 2018 4:14 pm

cpumechanic wrote:
Tue Jul 10, 2018 3:58 pm
Hi

Got an email today from Penfed.. searched and did not find anyone else talking about this.
Minimum investment 1000, could not easily locate maximum allowed.
The penalty for early withdraw is 30% of the total amount that would have been earned if you left all funds in for full period.
They do indicate that they only remove earnings or potential earnings, not principle if I read this correctly.

The early withdraw penalty seems a little harsh to me.

Here is some fine print from the application
=================================================
a) If redeemed within the frst year, all dividends
will be forfeited.
b) If redeemed thereafter, but prior to the maturity
date, the early withdrawal penalty will equal 30%
of what would have been earned if the certifcate
had been held to maturity, not to exceed total
dividends earned
3) Exceptions. The penalties described above
will not be applied if the redemption is made:
a) Subsequent to the death of any holder of the
certifcate;
b) As a result of the voluntary or involuntary
liquidation of the credit union.
=================================================

Is this a good deal?

CPU
It’s always puzzled me too
Keep calm and Boglehead on. KCBO.

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Kevin M
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Re: Penn Fed 3% 5 year CD's 30% penalty if early withdraw

Post by Kevin M » Tue Jul 10, 2018 5:16 pm

Not only is the EWP harsh, the rate is not very good. A new-issue brokered 3-year CD pays 3.05%, and I have been easily finding them at 3.1% or more on the secondary market when the new-issue rate was 3.00%.

New-issue 5-year brokered CDs earn 3.30%, but personally I don't think it's worth extending maturity by two years for only 25 basis points of additional yield.

One good thing about PenFed is that they waive the EWP for IRA CDs if you are age 59 1/2 of older, but I've never confirmed if this works for an IRA transfer out, or only for an outright distribution (in which case you could still do a rollover).

Kevin
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VictoriaF
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Location: Black Swan Lake

Re: Penn Fed 3% 5 year CD's 30% penalty if early withdraw

Post by VictoriaF » Tue Jul 10, 2018 5:23 pm

I've just purchased a PenFed 15-month CD at 2.4%. Andrews FCU is offering 9-month CDs at 2.75% APY, but I've learned about it too late.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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Kevin M
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Re: Penn Fed 3% 5 year CD's 30% penalty if early withdraw

Post by Kevin M » Tue Jul 10, 2018 5:45 pm

VictoriaF wrote:
Tue Jul 10, 2018 5:23 pm
I've just purchased a PenFed 15-month CD at 2.4%. Andrews FCU is offering 9-month CDs at 2.75% APY, but I've learned about it too late.

Victoria
A 15-month at 2.4% is not so great, with the 1-year brokered new-issue CD yield at 2.45% at Fidelity and 2.40% at Vanguard. I just opened a savings account at 2.50%, guaranteed through December 2019 (sorry, it's a local-only account).

However, a 9-month at 2.75% is quite good. I had been thinking of buying some 1-year Treasuries at the next auction, but at current yields, the taxable-equivalent yield (TEY) for me would be maybe 2.6-2.7%, so the 9-month CD would be better. Thanks for pointing it out! Already a member of Andrews, so should be easy to buy.

Kevin
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Kuckie
Posts: 162
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Re: Penn Fed 3% 5 year CD's 30% penalty if early withdraw

Post by Kuckie » Wed Jul 11, 2018 4:09 pm

Andrews Federal Credit Union is offering a 9 month CD paying 2.75 percent APR.
andrewsFCU.org
Note: Each individual member limited to one Special 9-Month Certificate during the promotional period
For Early Withdrawal a penalty of 90 days of dividends is imposed

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