Ally Bank 11 month [No-Penalty CD]
Ally Bank 11 month [No-Penalty CD]
[1.75% rate discussion starts on Page 5, 2.00% deal on Page 6 --admin LadyGeek]
Ally announced over the weekend an 11 month CD at 1.25% with no penalty for closing early.
For very short term, it's a decent rate. The no penalty, should rates shoot up (or you just need access to your funds)
allows a penalty fee closing (you can not partially close, so open multiple if you think you might need some).
Https://www.ally.com/bank/no-penalty-cd/
Ally announced over the weekend an 11 month CD at 1.25% with no penalty for closing early.
For very short term, it's a decent rate. The no penalty, should rates shoot up (or you just need access to your funds)
allows a penalty fee closing (you can not partially close, so open multiple if you think you might need some).
Https://www.ally.com/bank/no-penalty-cd/
Re: Ally Bank 1.25% 11 month with no EWP
Thanks for posting that. Seems like there's no disadvantage vs. keeping money in the 1% savings?
Re: Ally Bank 1.25% 11 month with no EWP
I'm already in the process of moving my banking from Bank of America and Synchrony (savings) and consolidating with Ally for simplicity. This sounds like a great way to store my E-Fund and get a risk-free yield that's higher than most Savings accounts.
Is there any risk to this that I'm not seeing? Apparently you can withdraw anytime after 6 days and there are no fees, including Early Withdrawal Penalties.
Is there any risk to this that I'm not seeing? Apparently you can withdraw anytime after 6 days and there are no fees, including Early Withdrawal Penalties.
Re: Ally Bank 1.25% 11 month with no EWP
If you put all your money into 1 CD and wish to withdraw only partial, you must close out the CD (no partial).GMan82 wrote:I'm already in the process of moving my banking from Bank of America and Synchrony (savings) and consolidating with Ally for simplicity. This sounds like a great way to store my E-Fund and get a risk-free yield that's higher than most Savings accounts.
Is there any risk to this that I'm not seeing? Apparently you can withdraw anytime after 6 days and there are no fees, including Early Withdrawal Penalties.
If you feel you might need partial w/d, setting up several small rather than one large CD probably works best.
Also the time to close and transfer funds might be a couple of days. Transferring from a savings to a checking usually is immediate (if both at Ally).
Re: Ally Bank 1.25% 11 month with no EWP
All good points. I keep $1000 in checking for immediate use at all times. A credit card is also good for backup. A nice thing for me though is that my E-fund can then sit still and my mortgage short term savings can sit in my Savings Account.
I suppose what I should really see this as is my mortgage savings in the CD and my EFund still in HYS. Semantics. But still a decent deal here.
I suppose what I should really see this as is my mortgage savings in the CD and my EFund still in HYS. Semantics. But still a decent deal here.
Re: Ally Bank 1.25% 11 month with no EWP
Or right now for up to $10K per taxpayer per year, you could get I bonds with a guaranteed minimum of 1.38%.
Re: Ally Bank 1.25% 11 month with no EWP
You can not redeem the first year and if redeemed before 5 years, there is a 3 month penalty.Mr. Gatti wrote:Or right now for up to $10K per taxpayer per year, you could get I bonds with a guaranteed minimum of 1.38%.
Re: Ally Bank 1.25% 11 month with no EWP
My crystal ball is cloudy - I've had my emergency fund and house down payment stashed in a 1% savings account at Capital One. With 1-yr CD's at 1.25%, I didn't want to lose the flexibility or deal with the hassle for 25bp.
Do you think the rates on online savings accounts (Ally, Synchrony, CapitalOne) will rise more or less in lock-step with market rates on CD's? If the Fed raises rates another 1.0% by Dec-2017, would you expect Savings rates to rise equivalently?
It doesn't really matter to me, because by definition my assets are liquid, and if I decide the spread has gotten too big, I can easily make the switch.
Do you think the rates on online savings accounts (Ally, Synchrony, CapitalOne) will rise more or less in lock-step with market rates on CD's? If the Fed raises rates another 1.0% by Dec-2017, would you expect Savings rates to rise equivalently?
It doesn't really matter to me, because by definition my assets are liquid, and if I decide the spread has gotten too big, I can easily make the switch.
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Re: Ally Bank 1.25% 11 month with no EWP
Behold. My redneck bank account pays as much. And i get a debit card with a ridiculous horse.
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Re: Ally Bank 1.25% 11 month with no EWP
I guess it's a matter of perspective. If you say 25bps it doesn't seem like much. But if you say 25% increase in the interest rate it seems like a lot more. I've got some extra money from my RMD sitting in Ally right now that I don't intend to spend for awhile so I guess I'll take them up in the offer.frisbee wrote:My crystal ball is cloudy - I've had my emergency fund and house down payment stashed in a 1% savings account at Capital One. With 1-yr CD's at 1.25%, I didn't want to lose the flexibility or deal with the hassle for 25bp....
The surest way to know the future is when it becomes the past.
Re: Ally Bank 1.25% 11 month with no EWP
Technically, you are correct about not redeeming within first 12 months. If you buy at the end of the month, it's a little over 11 months until you can redeem.Rob5TCP wrote:You can not redeem the first year and if redeemed before 5 years, there is a 3 month penalty.Mr. Gatti wrote:Or right now for up to $10K per taxpayer per year, you could get I bonds with a guaranteed minimum of 1.38%.
For I Bonds bought from now until the end of April 2017, even with the 3 month penalty you would get a minimum of 1.38%. The 1.38% will be paid for the first 6 month period. Even if the next inflation rate is 0 and you had the penalty, you would still not get any less than 1.38%.
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Re: Ally Bank 1.25% 11 month with no EWP
Excellent; thanks for the tip. No penalty means it is liquid if need be, so I just opened this CD and instantly poured my Reserve Fund into it that was previously the bulk of my Ally Online Savings. It seems a bit silky, but an extra couple dollars or so a month is nice.
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Re: Ally Bank 1.25% 11 month with no EWP
Is this some sort of special? Or have they always had this CD? My NRL FCU 777 CD deal matures in a few days. I want to transfer that cash into this CD. Hopefully it will still be active this week.
Last edited by GMan82 on Sat Dec 17, 2016 11:06 pm, edited 1 time in total.
Re: Ally Bank 1.25% 11 month with no EWP
Yes, they have had the 11 month "no-penalty" CD for a long time. They just raised the rate on Friday--used to be .87%, I think.
Re: Ally Bank 1.25% 11 month with no EWP
Is the CD interest paid monthly similar to their checking accounts?
Re: Ally Bank 1.25% 11 month with no EWP
Hopefully I'll see it tomorrow. Not advertised in NW as of 10PM
Re: Ally Bank 1.25% 11 month with no EWP
Vanguard's Limited Term Tax Exempt Bond fund (VMLTX) has a current SEC yield of 1.47%. For those of us in high federal tax brackets (33% for me), I think this may make more sense than even the Ally 11-month CD. It's average duration is about 2.5 years and it's risk is rated level 1 on Vanguard's site.
I may actually just open a second taxable account (to keep things separate) and move the cash I'm saving for a mortgage downpayment into this fund. It's low-risk, vs the risk-free CD, higher-yielding, but also comes with a lower tax bill, too.
Is this a crazy idea? I don't mind taking a little risk using a short duration Bond fund for money I may need anywhere from 12-36 months from now. I will admit I don't fully understand Bond funds, but this appears to be a better deal.
I may actually just open a second taxable account (to keep things separate) and move the cash I'm saving for a mortgage downpayment into this fund. It's low-risk, vs the risk-free CD, higher-yielding, but also comes with a lower tax bill, too.
Is this a crazy idea? I don't mind taking a little risk using a short duration Bond fund for money I may need anywhere from 12-36 months from now. I will admit I don't fully understand Bond funds, but this appears to be a better deal.
Re: Ally Bank 1.25% 11 month with no EWP
Same situation for me. I think I understand risky (bonds) vs. risk free (CD), and that a CD and Bonds are two different asset classes. I guess the question you & I need to answer is are we willing to absorb market & inflation risk for the ~0.7% yield advantage of the bond fund?GMan82 wrote:Vanguard's Limited Term Tax Exempt Bond fund (VMLTX) has a current SEC yield of 1.47%. For those of us in high federal tax brackets (33% for me), I think this may make more sense than even the Ally 11-month CD. It's average duration is about 2.5 years and it's risk is rated level 1 on Vanguard's site.
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Re: Ally Bank 1.25% 11 month with no EWP
This seems like a great deal and a great move by Ally. If the Fed raises rates three to four times next year like they said they might and Ally raises rates on CD's again, then break the CD and put the money in the new CD.
FWIW, in a high tax bracket like yours, I would do it.
If you bought into it with the same justification three months ago, today you'd be down over a year's worth of interest and would need to hope either for interest rates to fall or stay steady while you collect monthly interest just to break even on your investment. If you don't mind holding on like that, then go for it.GMan82 wrote:Vanguard's Limited Term Tax Exempt Bond fund (VMLTX) has a current SEC yield of 1.47%. For those of us in high federal tax brackets (33% for me), I think this may make more sense than even the Ally 11-month CD. It's average duration is about 2.5 years and it's risk is rated level 1 on Vanguard's site.
I may actually just open a second taxable account (to keep things separate) and move the cash I'm saving for a mortgage downpayment into this fund. It's low-risk, vs the risk-free CD, higher-yielding, but also comes with a lower tax bill, too.
Is this a crazy idea? I don't mind taking a little risk using a short duration Bond fund for money I may need anywhere from 12-36 months from now. I will admit I don't fully understand Bond funds, but this appears to be a better deal.
FWIW, in a high tax bracket like yours, I would do it.
Re: Ally Bank 1.25% 11 month with no EWP
Thanks for the heads-up. I just moved funds from my online savings account to this CD. Picked up the extra 25bps (well 23bps over 11 months). Good deal.Rob5TCP wrote:Ally announced over the weekend an 11 month CD at 1.25% with no penalty for closing early.
For very short term, it's a decent rate. The no penalty, should rates shoot up (or you just need access to your funds)
allows a penalty fee closing (you can not partially close, so open multiple if you think you might need some).
Https://www.ally.com/bank/no-penalty-cd/
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Re: Ally Bank 1.25% 11 month with no EWP
Thanks for the heads up! We're going to move part of our house down payment fund to an Ally cd today. We aren't planning to buy in the next year but wouldn't rule it out if the right deal came along so no EWP makes this a great fit for us.
Re: Ally Bank 1.25% 11 month with no EWP
Ditto that for us too. Thanks for noting.MikeG62 wrote: Thanks for the heads-up. I just moved funds from my online savings account to this CD. Picked up the extra 25bps (well 23bps over 11 months). Good deal.
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Re: Ally Bank 1.25% 11 month with no EWP
Thank you for the very actionable information.Rob5TCP wrote:Ally announced over the weekend an 11 month CD at 1.25% with no penalty for closing early.
For very short term, it's a decent rate. The no penalty, should rates shoot up (or you just need access to your funds)
allows a penalty fee closing (you can not partially close, so open multiple if you think you might need some).
Https://www.ally.com/bank/no-penalty-cd/
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Re: Ally Bank 1.25% 11 month with no EWP
So in a high tax bracket, you would go for the bond fund, then? I have to think on this a little. With the Fed saying they'll increase rates 3 times in 2017, bond funds will likely go down. I'm wondering if the yield advantage of this fund will then outweigh the taxable dividends of the CD in the end. So I need to figure out: Ally CD vs VMLTX. In the end, the amount of money earned by taxable interest vs non-taxable interest may be insignificant on a $10k investment even in the 33% federal and 6% state bracket. With a layered EFund (I-bonds, some cash, and potentially this CD or Bond fund) going either direction might still be acceptable.simplesimon wrote:This seems like a great deal and a great move by Ally. If the Fed raises rates three to four times next year like they said they might and Ally raises rates on CD's again, then break the CD and put the money in the new CD.
If you bought into it with the same justification three months ago, today you'd be down over a year's worth of interest and would need to hope either for interest rates to fall or stay steady while you collect monthly interest just to break even on your investment. If you don't mind holding on like that, then go for it.GMan82 wrote:Vanguard's Limited Term Tax Exempt Bond fund (VMLTX) has a current SEC yield of 1.47%. For those of us in high federal tax brackets (33% for me), I think this may make more sense than even the Ally 11-month CD. It's average duration is about 2.5 years and it's risk is rated level 1 on Vanguard's site.
I may actually just open a second taxable account (to keep things separate) and move the cash I'm saving for a mortgage downpayment into this fund. It's low-risk, vs the risk-free CD, higher-yielding, but also comes with a lower tax bill, too.
Is this a crazy idea? I don't mind taking a little risk using a short duration Bond fund for money I may need anywhere from 12-36 months from now. I will admit I don't fully understand Bond funds, but this appears to be a better deal.
FWIW, in a high tax bracket like yours, I would do it.
Decisions decisions.
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Re: Ally Bank 1.25% 11 month with no EWP
Ally gives you a few different options:mac808 wrote:Is the CD interest paid monthly similar to their checking accounts?
Interest paid at maturity.
Interest paid monthly depositing into an account of your choice or by check via mail.
Interest paid quarterly depositing into an account of your choice or by check via mail.
Re: Ally Bank 1.25% 11 month with no EWP
At Ally, can you automatically roll over to a new CD, or do you have to deal with it each year?
Re: Ally Bank 1.25% 11 month with no EWP
Unfortunately---not available for IRA accounts
Re: Ally Bank 1.25% 11 month with no EWP
It's worth noting that in order to get the full APY, you have to choose the first option (it's also the default) as the APY takes compounding interests into account.simplesimon wrote:Ally gives you a few different options:mac808 wrote:Is the CD interest paid monthly similar to their checking accounts?
Interest paid at maturity.
Interest paid monthly depositing into an account of your choice or by check via mail.
Interest paid quarterly depositing into an account of your choice or by check via mail.
Re: Ally Bank 1.25% 11 month with no EWP
Says on their website, they will automatically roll it.frisbee wrote:At Ally, can you automatically roll over to a new CD, or do you have to deal with it each year?
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Re: Ally Bank 1.25% 11 month with no EWP
At ally, you can pre-choose what you want to happen at maturity. You can let it rollover, or my my case I had it transferred automatically to my Ally money maket account.frisbee wrote:At Ally, can you automatically roll over to a new CD, or do you have to deal with it each year?
"Borrow money from pessimists -- they don't expect it back"
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Re: Ally Bank 1.25% 11 month with no EWP
That's right.pasadena wrote:It's worth noting that in order to get the full APY, you have to choose the first option (it's also the default) as the APY takes compounding interests into account.simplesimon wrote:Ally gives you a few different options:mac808 wrote:Is the CD interest paid monthly similar to their checking accounts?
Interest paid at maturity.
Interest paid monthly depositing into an account of your choice or by check via mail.
Interest paid quarterly depositing into an account of your choice or by check via mail.
Interest compounds daily and they tell you the "current redemption amount" which includes accrued interest.
Re: Ally Bank 1.25% 11 month with no EWP
This information is already priced into bonds today.GMan82 wrote:With the Fed saying they'll increase rates 3 times in 2017, bond funds will likely go down.
Re: Ally Bank 1.25% 11 month with no EWP
Thank you for that ... Made the exchange right before lunch, and according to my calculations this info will pay for about 10 of them.
Re: Ally Bank 1.25% 11 month with no EWP
A portion of our portfolio is dedicated to short-term fixed income. The time horizon for these funds is 3 years.frisbee wrote:Same situation for me. I think I understand risky (bonds) vs. risk free (CD), and that a CD and Bonds are two different asset classes. I guess the question you & I need to answer is are we willing to absorb market & inflation risk for the ~0.7% yield advantage of the bond fund?GMan82 wrote:Vanguard's Limited Term Tax Exempt Bond fund (VMLTX) has a current SEC yield of 1.47%. For those of us in high federal tax brackets (33% for me), I think this may make more sense than even the Ally 11-month CD. It's average duration is about 2.5 years and it's risk is rated level 1 on Vanguard's site.
That bucket is comprised of I Bonds, CDs and VMLTX. I use VMLTX when I can't find a decent CD rate, which has been rare lately (I have a couple 3% 3 year CDs). That being said, I think VMLTX is an excellent choice in this scenario.
Re: Ally Bank 1.25% 11 month with no EWP
I was just about to fund Andrews FCU Certificates. Trying to decide whether funds I don't view as short term investment should go into the
Thoughts?
- AFCU 3.01% 7-year CD with 180 EWP,
AFCU 3.01% 6 month CD (painful early withdrawal)) or
the Ally 1.25% 11 month CD with no EWP.
Thoughts?
Re: Ally Bank 1.25% 11 month with no EWP
AFCU 6 month is max $15K and a hard credit pullzeep wrote:I was just about to fund Andrews FCU Certificates. Trying to decide whether funds I don't view as short term investment should go into theI'm thinking the 3% 6 month CD is looking good.
- AFCU 3.01% 7-year CD with 180 EWP,
AFCU 3.01% 6 month CD (painful early withdrawal)) or
the Ally 1.25% 11 month CD with no EWP.
Thoughts?
Re: Ally Bank 1.25% 11 month with no EWP
don't know about the hard pull but they allowed more than that so ask when you call.tenkuky wrote:AFCU 6 month is max $15K and a hard credit pullzeep wrote:I was just about to fund Andrews FCU Certificates. Trying to decide whether funds I don't view as short term investment should go into theI'm thinking the 3% 6 month CD is looking good.
- AFCU 3.01% 7-year CD with 180 EWP,
AFCU 3.01% 6 month CD (painful early withdrawal)) or
the Ally 1.25% 11 month CD with no EWP.
Thoughts?
Re: Ally Bank 1.25% 11 month with no EWP
so if you pick the first option and pull out early, you get nothing?simplesimon wrote:That's right.pasadena wrote:It's worth noting that in order to get the full APY, you have to choose the first option (it's also the default) as the APY takes compounding interests into account.simplesimon wrote:Ally gives you a few different options:mac808 wrote:Is the CD interest paid monthly similar to their checking accounts?
Interest paid at maturity.
Interest paid monthly depositing into an account of your choice or by check via mail.
Interest paid quarterly depositing into an account of your choice or by check via mail.
Interest compounds daily and they tell you the "current redemption amount" which includes accrued interest.
It's a paltry difference...1.2429 going 12 months, vs 1.2442 going quarterly - so go monthly.
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Re: Ally Bank 1.25% 11 month with no EWP
I don't know why these CUs think they need a hard pull when you're handing your money over to them. Same thing happened to me when I joined LMCU and put about $65K into their products.
The surest way to know the future is when it becomes the past.
Re: Ally Bank 1.25% 11 month with no EWP
Good to know. I guess fluctuations in the coming months will just be the usual short-term fluctuations. If not, then I suppose a TLH opportunity would show up.Bfwolf wrote:This information is already priced into bonds today.
Thanks for your comment. I just feel that with a little extra risk, I can get not only a better yield but a better after-tax Yield as well. At my marginal rate, I would need a tax-equivalent Yield of over 2.1% to match the tax-exempt Bond fund. I have some I bonds, which I hope to eventually put my entire EFund in, but for short term savings, that could be needed anywhere from 1-3 years from now, most CDs at that yield are too long. Plus I won't be able to add to it like I can a fund.feh wrote:A portion of our portfolio is dedicated to short-term fixed income. The time horizon for these funds is 3 years.
That bucket is comprised of I Bonds, CDs and VMLTX. I use VMLTX when I can't find a decent CD rate, which has been rare lately (I have a couple 3% 3 year CDs). That being said, I think VMLTX is an excellent choice in this scenario.
Anyway, I still think the Ally CD is a good spot to temporarily house my EFund until I can get it into I Bonds. I might use the Bond fund for my short-term savings.
I just need to figure out if I just put it all into my current vanguard brokerage or open a separate brokerage account just for the short term savings so that it doesn't throw off the portfolio analyzer when I try to rebalance.
Re: Ally Bank 1.25% 11 month with no EWP
If you break the CD early, and had chosen for the interest to be paid at maturity, it makes sense to me that the already accrued interest would just be paid out when you pull out early. Is that not the case?batpot wrote: so if you pick the first option and pull out early, you get nothing?
It's a paltry difference...1.2429 going 12 months, vs 1.2442 going quarterly - so go monthly.
Re: Ally Bank 1.25% 11 month with no EWP
you may be right.GMan82 wrote:If you break the CD early, and had chosen for the interest to be paid at maturity, it makes sense to me that the already accrued interest would just be paid out when you pull out early. Is that not the case?batpot wrote: so if you pick the first option and pull out early, you get nothing?
It's a paltry difference...1.2429 going 12 months, vs 1.2442 going quarterly - so go monthly.
Re: Ally Bank 1.25% 11 month with no EWP
So I signed up for 1.25%. I moved the money from a savings account at Ally bank with a 1% rate. The process went okay.
It occurs to me though that for every $10,000 someone switches over, when they go from 1% to 1.25% they make about 22 dollars more after 11months. Arguably this isn't worth the added complexity of opening the CD accounts.
It occurs to me though that for every $10,000 someone switches over, when they go from 1% to 1.25% they make about 22 dollars more after 11months. Arguably this isn't worth the added complexity of opening the CD accounts.
Re: Ally Bank 1.25% 11 month with no EWP
After taxes, it's even less. For me, after 33% federal and 6% GA state, it's actually about $13 more. But I guess with yields still being so low, this is where we're at. More reason to look at the low-risk Tax-Exempt funds. Now if only tax-exempt money-market yields were worth it. Vanguard's MM Tax-exempt fund (VMSXX) has a SEC yield of 0.51%. I would need an taxable equivalent yield of 0.0051/(1-0.33-0.06) = 0.84%. In this case, the Ally 11-month CD at 1.25% or their HYS at 1% makes the taxable dividends worth it. This is assuming I'm calculating the tax-equivalent yields correctly using both my federal marginal and Georgia marginal rates.junior wrote:So I signed up for 1.25%. I moved the money from a savings account at Ally bank with a 1% rate. The process went okay.
It occurs to me though that for every $10,000 someone switches over, when they go from 1% to 1.25% they make about 22 dollars more after 11months. Arguably this isn't worth the added complexity of opening the CD accounts.
However, with Vgd Short-term Tax Exempt SEC yield of 1.01% (VWSTX), I'd need a tax-equivalent yield of about 1.65% in Savings or CDs to make it worth it. On bankrate, the CDs with that yield are roughly 3-year CDs, but the bond duration is roughly 1 year in VWSTX. I don't know of an HYS accounts that offer that rate, other than some rewards checking accounts that require TONS of hoops to jump through that make it annoying. Going towards Vgd Limted Term Tax Exempt (VMLTX), the SEC yield is 1.47%. The tax-equivalent yield for a CD/HYS/MM account would be about 2.41%. On Bankrate, the CDs that offer that rate don't exist at the 5 year mark. Though I've heard of some of the 3% CDs that are talked about elsewhere on this site. VMLTX is roughly 2.5 years in average duration.
Moral of this story: I'm beginning to think Yield chasing at these low yields is MUCH more work than it's worth. Either accept the "High Yield" of savings accounts, which is actually a lot less once taxes are accounted for, or take some risk and use a low-risk, short/limited-term tax-exempt Bond fund if you're in a higher tax bracket. My tax-bracket is making these CDs less than appealing, really, just because I keep less of the dividends. I-bonds are a nice alternative, in my opinion, with tax-deferral for up to 30 years, but the $10k limit per year and the inability to access for at least 1 year makes them challenging.
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Re: Ally Bank 1.25% 11 month with no EWP
what do you think about VCAIX (Cal. Tax-Exempt Intermediate Term)? SEC Yield at 2.12%; average duration 5.3 yrs. I am at 35/10 for fed/cal. taxes. currently have emergency fund in ally at 1.0%. thanks.GMan82 wrote:After taxes, it's even less. For me, after 33% federal and 6% GA state, it's actually about $13 more. But I guess with yields still being so low, this is where we're at. More reason to look at the low-risk Tax-Exempt funds. Now if only tax-exempt money-market yields were worth it. Vanguard's MM Tax-exempt fund (VMSXX) has a SEC yield of 0.51%. I would need an taxable equivalent yield of 0.0051/(1-0.33-0.06) = 0.84%. In this case, the Ally 11-month CD at 1.25% or their HYS at 1% makes the taxable dividends worth it. This is assuming I'm calculating the tax-equivalent yields correctly using both my federal marginal and Georgia marginal rates.junior wrote:So I signed up for 1.25%. I moved the money from a savings account at Ally bank with a 1% rate. The process went okay.
It occurs to me though that for every $10,000 someone switches over, when they go from 1% to 1.25% they make about 22 dollars more after 11months. Arguably this isn't worth the added complexity of opening the CD accounts.
However, with Vgd Short-term Tax Exempt SEC yield of 1.01% (VWSTX), I'd need a tax-equivalent yield of about 1.65% in Savings or CDs to make it worth it. On bankrate, the CDs with that yield are roughly 3-year CDs, but the bond duration is roughly 1 year in VWSTX. I don't know of an HYS accounts that offer that rate, other than some rewards checking accounts that require TONS of hoops to jump through that make it annoying. Going towards Vgd Limted Term Tax Exempt (VMLTX), the SEC yield is 1.47%. The tax-equivalent yield for a CD/HYS/MM account would be about 2.41%. On Bankrate, the CDs that offer that rate don't exist at the 5 year mark. Though I've heard of some of the 3% CDs that are talked about elsewhere on this site. VMLTX is roughly 2.5 years in average duration.
Moral of this story: I'm beginning to think Yield chasing at these low yields is MUCH more work than it's worth. Either accept the "High Yield" of savings accounts, which is actually a lot less once taxes are accounted for, or take some risk and use a low-risk, short/limited-term tax-exempt Bond fund if you're in a higher tax bracket. My tax-bracket is making these CDs less than appealing, really, just because I keep less of the dividends. I-bonds are a nice alternative, in my opinion, with tax-deferral for up to 30 years, but the $10k limit per year and the inability to access for at least 1 year makes them challenging.
Re: Ally Bank 1.25% 11 month with no EWP
I'm talking about using these tax-exempt funds in lieu of an Ally HYS or no-penalty CD in a tiered Emergency Fund or for short-term savings. That fund has a duration of about 5 years so you'd need to be able to tolerate some interest rate risk or mix it with a short-term fund to lower the duration. Is the extra yield worth the effort though? I don't know enough about bonds to really advise you, but that's what I would do.
- simplesimon
- Posts: 4578
- Joined: Mon Feb 25, 2008 7:53 pm
Re: Ally Bank 1.25% 11 month with no EWP
If you pick the first option and withdraw early, you get the stated "current redemption amount" which includes accrued interest.batpot wrote:so if you pick the first option and pull out early, you get nothing?simplesimon wrote:That's right.pasadena wrote:It's worth noting that in order to get the full APY, you have to choose the first option (it's also the default) as the APY takes compounding interests into account.simplesimon wrote:Ally gives you a few different options:mac808 wrote:Is the CD interest paid monthly similar to their checking accounts?
Interest paid at maturity.
Interest paid monthly depositing into an account of your choice or by check via mail.
Interest paid quarterly depositing into an account of your choice or by check via mail.
Interest compounds daily and they tell you the "current redemption amount" which includes accrued interest.
It's a paltry difference...1.2429 going 12 months, vs 1.2442 going quarterly - so go monthly.
- TheTimeLord
- Posts: 12130
- Joined: Fri Jul 26, 2013 2:05 pm
Re: Ally Bank 1.25% 11 month with no EWP
No it isn't. A percentage of it is but even then The Fed only controls a small part of the yield curve. Which funds get hurt and which do well will depend on if the yield curve flattens or steepens and that is a function of perceived future growth, inflation and supply and demand.Bfwolf wrote:This information is already priced into bonds today.GMan82 wrote:With the Fed saying they'll increase rates 3 times in 2017, bond funds will likely go down.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
- TheTimeLord
- Posts: 12130
- Joined: Fri Jul 26, 2013 2:05 pm
Re: Ally Bank 1.25% 11 month with no EWP
Really? How much do you normally get paid for 5-10 minutes worth of work?junior wrote:So I signed up for 1.25%. I moved the money from a savings account at Ally bank with a 1% rate. The process went okay.
It occurs to me though that for every $10,000 someone switches over, when they go from 1% to 1.25% they make about 22 dollars more after 11months. Arguably this isn't worth the added complexity of opening the CD accounts.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]