Why not CDs instead of Short Term Bonds or TIPS

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drummerboy
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Why not CDs instead of Short Term Bonds or TIPS

Post by drummerboy » Sun Oct 15, 2017 5:23 pm

In my 401k, I maintain some of my "safe" portfolio.

This typically consists of taxable bond funds, TIPS funds, etc.

This is part of my LP. Larry would of course recommend TIPS or ST Treasuries as part of this allocation.
I recognize that TIPS are to protect from "unexpected" inflation. Of course, the typical intermediate TIPS fund is not yielding much and is very volatile for a "safe" investment.

And short-term treasuries, liquid, but not much of a return. And the risk of short-term capital loss as the FED raises rates.

Why not just start a 5-year CD ladder in my 401k (@ Fidelity). It currently yields around 1.93% for a 5-year ladder. No loss of capital, FDIC insured. Yes, no inflation protection.

Would this be a better strategy?

retiredjg
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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by retiredjg » Sun Oct 15, 2017 5:28 pm

I don't know what is better, but CDs are reasonable choice for the "fixed income" side of the portfolio. Fixed income does not have to be bonds or bond funds.

Not sure about CDs in a 401k though....not saying that part is a bad idea, just don't know enough.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by dbr » Sun Oct 15, 2017 5:32 pm

drummerboy wrote:
Sun Oct 15, 2017 5:23 pm
In my 401k, I maintain some of my "safe" portfolio.

This typically consists of taxable bond funds, TIPS funds, etc.

This is part of my LP. Larry would of course recommend TIPS or ST Treasuries as part of this allocation.
I recognize that TIPS are to protect from "unexpected" inflation. Of course, the typical intermediate TIPS fund is not yielding much and is very volatile for a "safe" investment.

And short-term treasuries, liquid, but not much of a return. And the risk of short-term capital loss as the FED raises rates.

Why not just start a 5-year CD ladder in my 401k (@ Fidelity). It currently yields around 1.93% for a 5-year ladder. No loss of capital, FDIC insured. Yes, no inflation protection.

Would this be a better strategy?
It can be if current interest rate structure provides a CD market that is beneficial relative to other investments. Lots of posters on this forum recommend that at this time.

As far as yields being low, the yields on everything including CDs is low. The last CDs I owned offered 10% for ten years. Personally I would be more spooked about inflation in the long run than by volatility, but then I am not all that hot on the basic concept of the LMP with the exception of including an inflation indexed annuity, which may be hard to come by on good terms or even at all, except SS delayed to age 70.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by 2015 » Sun Oct 15, 2017 6:19 pm

Because I'm too lazy to open CD's; hence, STB fund. That may change in a couple of years.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by remomnyc » Sun Oct 15, 2017 6:31 pm

I say yes to CDs for my short-term cash needs. Money i need in within 5 yrs is in cd-ladders, both in taxable and in brokered CDs in my 401k. The rest of my fixed income is in VG total bond fund. This way, I don't need to sell my bond fund when it is down if interest rates are rising.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Tyler Aspect » Sun Oct 15, 2017 7:23 pm

drummerboy wrote:
Sun Oct 15, 2017 5:23 pm
In my 401k, I maintain some of my "safe" portfolio.

This typically consists of taxable bond funds, TIPS funds, etc.

This is part of my LP. Larry would of course recommend TIPS or ST Treasuries as part of this allocation.
I recognize that TIPS are to protect from "unexpected" inflation. Of course, the typical intermediate TIPS fund is not yielding much and is very volatile for a "safe" investment.

And short-term treasuries, liquid, but not much of a return. And the risk of short-term capital loss as the FED raises rates.

Why not just start a 5-year CD ladder in my 401k (@ Fidelity). It currently yields around 1.93% for a 5-year ladder. No loss of capital, FDIC insured. Yes, no inflation protection.

Would this be a better strategy?
If you do have access to brokered CDs in your 401k account, then you can buy some to fill your bond allocation. Remember to buy less than $250,000 per bank and buy non-callable CDs with price less than $100 (par value).
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by mega317 » Sun Oct 15, 2017 11:24 pm

I don't know if my answer will be entirely relevant for you but I prefer the flexibility of mutual funds. If I want to sell some stocks in taxable but don't want to change my asset allocation, I will exchange some bonds for stocks in tax-advantaged. I can do that in any amount with a few clicks. I haven't used brokered CD ladders but I imagine it would be a bit more complicated.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Leif » Sun Oct 15, 2017 11:48 pm

drummerboy wrote:
Sun Oct 15, 2017 5:23 pm
Why not just start a 5-year CD ladder in my 401k (@ Fidelity). It currently yields around 1.93% for a 5-year ladder. No loss of capital, FDIC insured. Yes, no inflation protection.

Would this be a better strategy?
I think so. That is what I'm doing. The other risk is a rise in rates. I try to get CDs with a lower early withdrawal penalty.

I've built a 5 year ladder over time in taxable. When one year comes due I will take what I need and add the rest to a new 5 year CD. I also have ST bonds and TIPS for asset diversification in my retirement accounts.
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Valuethinker » Mon Oct 16, 2017 4:06 am

drummerboy wrote:
Sun Oct 15, 2017 5:23 pm
In my 401k, I maintain some of my "safe" portfolio.

This typically consists of taxable bond funds, TIPS funds, etc.

This is part of my LP. Larry would of course recommend TIPS or ST Treasuries as part of this allocation.
I recognize that TIPS are to protect from "unexpected" inflation. Of course, the typical intermediate TIPS fund is not yielding much and is very volatile for a "safe" investment.

And short-term treasuries, liquid, but not much of a return. And the risk of short-term capital loss as the FED raises rates.

Why not just start a 5-year CD ladder in my 401k (@ Fidelity). It currently yields around 1.93% for a 5-year ladder. No loss of capital, FDIC insured. Yes, no inflation protection.

Would this be a better strategy?
Given it is a ladder the inflation rate is less of a concern. The duration of your portfolio would only be around 2.5 years.

If inflation rose unexpectedly, the Fed would raise interest rates. The "market value" of your CDs would fall. But since you hold to maturity, you can just roll them into higher interest rate CDs when they mature.

Even at 1.93% of course you are behind inflation (a bit). That, unfortunately, is the nature of financial markets, here and now.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Dandy » Mon Oct 16, 2017 6:13 am

CDs are a good alternative for the "safe" portfolio. While the TIPS fund is good to have I don't include it in my Dr. Bernstein's concept of having 20* years in safe products. You are correct that it is somewhat volatile. In my "safe" portfolio I have short term bond funds and no loss of principal products e.g. FDIC products, money markets. legacy EE bonds, and if I still had access: Stable Value Fund. I carry the TIPS fund in my "risk" portfolio along with other intermediate bond funds and equities.

Really "safe" products have terrible yields but I keep reminding myself that their purpose isn't income it is safety. Also, we must remember to top off our "safe" portfolio on occasion to make sure it keeps up with general and personal inflation.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by nisiprius » Mon Oct 16, 2017 6:53 am

drummerboy wrote:
Sun Oct 15, 2017 5:23 pm
In my 401k, I maintain some of my "safe" portfolio.

This typically consists of taxable bond funds, TIPS funds, etc.

This is part of my LP. Larry would of course recommend TIPS or ST Treasuries as part of this allocation.
I recognize that TIPS are to protect from "unexpected" inflation. Of course, the typical intermediate TIPS fund is not yielding much and is very volatile for a "safe" investment.

And short-term treasuries, liquid, but not much of a return. And the risk of short-term capital loss as the FED raises rates.

Why not just start a 5-year CD ladder in my 401k (@ Fidelity). It currently yields around 1.93% for a 5-year ladder. No loss of capital, FDIC insured. Yes, no inflation protection.

Would this be a better strategy?
A CD ladder instead of a short-term bond fund, an intermediate-term bond fund, or a TIPS fund are perfectly reasonable choices. Kevin M. has been arguing in the forum for some time that CDs are actually a better choice. Maybe, maybe not, but, no, you're not crazy, it is definitely reasonable.

I guess what I'm saying is that investment writers usually have blinkers on. They are thinking of or connected with "investment" firms, which actually provide specific kinds of investments--they're glorified stockbrokers that have expanded to offer bonds, mutual funds based on stocks and bonds, and other things. If you ask someone at Vanguard for a solution to an investing problem, they are going to tell you the best Vanguard mutual fund for that job. I think it's a combination of habit, familiarity, and self-interest. Advisory firms, for example, make money when they sell you mutual funds; they can't make money by telling you to put your money in a bank, or to buy United States series I savings bonds. So not only do they have a direct interest in preferring mutual-fund solutions, they also have no reason to have paid much attention to bank products or savings bonds.

With regard to inflation, everything depends on the time frame. Based on my personal experience with the double-digit inflation of the late 1970s, we had some pain regarding CDs and series EE savings bonds while inflation was rising, and we then had some joy when it started to fall--my wife had put some of my daughter's college money in an UGMA account in bank CDs, and when it came time to hand it over to my daughter, she was at first annoyed and thought my wife was foolish for having put the money into CDs, then astonished (and impressed) when she saw what the interest rate had been. I personally think it's crazy to buy non-inflation-adjused long-term bonds (e.g. 20 years), but a 5-year CD is a reasonable risk.

By the way, I'm not saying inflation isn't a risk--I think it's a big risk--but I hope you've noticed that people have been predicting inflation now since 2009 or so, and whenever you point out that despite QE2 or whatever there hasn't been any to speak of, people always just brush that aside and say "but watch out, it's just about to happen now, it's got to."

The biggest concern I personally have about CDs is that even though it has basically never happened, I think there is a chance that if interest rates rise really sharply, banks might begin denying early withdrawals from CDs. For decades now everybody has believe that CDs are just like demand deposits and that you have a right to get your money any time you like if you're willing to pay the penalty, but that's not necessarily true--there is often language about "at the bank's discretion" or "with the bank's permission" buried in the terms and conditions, and Ally added that language in 2012 while simultaneously telling columnist Allan Roth, verbally, that nothing had really changed. So I would be sure that you are in a situation where you will be fine if it should turn out that you are locked into the CD until it matures.
Last edited by nisiprius on Mon Oct 16, 2017 8:58 am, edited 1 time in total.
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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by TomatoTomahto » Mon Oct 16, 2017 6:55 am

Dandy wrote:
Mon Oct 16, 2017 6:13 am
CDs are a good alternative for the "safe" portfolio. While the TIPS fund is good to have I don't include it in my Dr. Bernstein's concept of having 20* years in safe products. You are correct that it is somewhat volatile. In my "safe" portfolio I have short term bond funds and no loss of principal products e.g. FDIC products, money markets. legacy EE bonds, and if I still had access: Stable Value Fund. I carry the TIPS fund in my "risk" portfolio along with other intermediate bond funds and equities.

Really "safe" products have terrible yields but I keep reminding myself that their purpose isn't income it is safety. Also, we must remember to top off our "safe" portfolio on occasion to make sure it keeps up with general and personal inflation.
I recently “remembered” that I have access to a Stable Value Fund in tax deferred, and I’ve started using it.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Valuethinker » Mon Oct 16, 2017 7:28 am

nisiprius wrote:
Mon Oct 16, 2017 6:53 am

The biggest concern I personally have about CDs is that even though it has basically never happened, I think there is a chance that if interest rates rise really sharply, banks might begin denying early withdrawals from CDs. For decades now everybody has believe that CDs are just like demand deposits and that you have a right to get your money any time you like if you're willing to pay the penalty, but that's not necessarily true--there is often language about "at the bank's discretion" or "with the bank's permission" buried in the terms and conditions, and Ally added that language in 2012 while simultaneously telling columnist Allan Roth, verbally, that nothing had really changed. So I would be sure that you are in a situation where you will be fine if it should turn out that you are locked into the CD until it matures.

And Ally Bank could be the test case. They are paying good rates (?) which is often a sign of financial stretching (Northern Rock was paying great rates in the UK just before it went bust, so were the Icelandic banks). And apparently they have a lot of exposure to auto loans-- an area of some concern in credit risk.

It's important to stay within FDIC limits per financial institution when buying CDs. That cannot be said enough times-- even if it is obvious.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Valuethinker » Mon Oct 16, 2017 7:41 am

TomatoTomahto wrote:
Mon Oct 16, 2017 6:55 am
Dandy wrote:
Mon Oct 16, 2017 6:13 am
CDs are a good alternative for the "safe" portfolio. While the TIPS fund is good to have I don't include it in my Dr. Bernstein's concept of having 20* years in safe products. You are correct that it is somewhat volatile. In my "safe" portfolio I have short term bond funds and no loss of principal products e.g. FDIC products, money markets. legacy EE bonds, and if I still had access: Stable Value Fund. I carry the TIPS fund in my "risk" portfolio along with other intermediate bond funds and equities.

Really "safe" products have terrible yields but I keep reminding myself that their purpose isn't income it is safety. Also, we must remember to top off our "safe" portfolio on occasion to make sure it keeps up with general and personal inflation.
I recently “remembered” that I have access to a Stable Value Fund in tax deferred, and I’ve started using it.
I think from discussions we have had here that the prudent investor does not have more than half of her fixed income investments in SVF. You are basically going on the insurance company's credit rating. And if there is another bad market crash like 2008-09, many insurers could be in a lot of trouble.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by welderwannabe » Mon Oct 16, 2017 7:47 am

Valuethinker wrote:
Mon Oct 16, 2017 7:41 am
I think from discussions we have had here that the prudent investor does not have more than half of her fixed income investments in SVF. You are basically going on the insurance company's credit rating. And if there is another bad market crash like 2008-09, many insurers could be in a lot of trouble.
+1
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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by TomatoTomahto » Mon Oct 16, 2017 8:03 am

Valuethinker wrote:
Mon Oct 16, 2017 7:41 am
TomatoTomahto wrote:
Mon Oct 16, 2017 6:55 am
Dandy wrote:
Mon Oct 16, 2017 6:13 am
CDs are a good alternative for the "safe" portfolio. While the TIPS fund is good to have I don't include it in my Dr. Bernstein's concept of having 20* years in safe products. You are correct that it is somewhat volatile. In my "safe" portfolio I have short term bond funds and no loss of principal products e.g. FDIC products, money markets. legacy EE bonds, and if I still had access: Stable Value Fund. I carry the TIPS fund in my "risk" portfolio along with other intermediate bond funds and equities.

Really "safe" products have terrible yields but I keep reminding myself that their purpose isn't income it is safety. Also, we must remember to top off our "safe" portfolio on occasion to make sure it keeps up with general and personal inflation.
I recently “remembered” that I have access to a Stable Value Fund in tax deferred, and I’ve started using it.
I think from discussions we have had here that the prudent investor does not have more than half of her fixed income investments in SVF. You are basically going on the insurance company's credit rating. And if there is another bad market crash like 2008-09, many insurers could be in a lot of trouble.
I am mindful of that, and currently have 3% of fixed income in SVF. It’s not enough to move the needle much. There are no free lunches.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by drummerboy » Mon Oct 16, 2017 7:22 pm

Thank you for all of the responses.

It is becoming obvious that perhaps a 50/50 mix of TIPS and a CD ladder would be better than a TIPS / LT Treasuries combination.

The yield premium on LT Treasuries can’t justify the duration risk.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by drummerboy » Tue Oct 17, 2017 5:35 am


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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by UncleBen » Tue Oct 17, 2017 6:25 am

TomatoTomahto wrote:
Mon Oct 16, 2017 8:03 am
I am mindful of that, and currently have 3% of fixed income in SVF. It’s not enough to move the needle much. There are no free lunches.
This. While 3% is not common in the corporate world, OP check your Stable Value Fund. We have 2 401k's, one yields <2%, the other 2.2%. It would not be worthwhile for us to fool around with a CD ladder @1.93% at present.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by hulburt1 » Tue Oct 17, 2017 6:48 am

I just use the money market fund. Can have the money in 2 days. I have 120,000 in IRA and 10,000 in Roth money market that I take out weekly for retirement. Plus have a line of credit up to 20,000...I have about 3 years of living in cash. 2m in S&P and face book.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Slick8503 » Tue Oct 17, 2017 9:59 am

hulburt1, consider using something other than MM. Even 1% extra interest on 130k is well over 1k in extra income a year. Switching even half of that money to a different fund would be time well spent in dollars per hour of work.

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Rob5TCP » Tue Oct 17, 2017 10:00 am

Kevin M.'s post last year and one earlier convinced me that the risk / reward ratio favored (and still does) higher yielding CD's.
I've put the max into 7 year 3.04% CD's with a 6 month EWP. On some of my earlier CD's; they had a 60 day EWP and I closed those
to put in the 3% CD's.

I also use Ally's 11 month CD's with no EWP for cash I may need in the next year.
If the "balance" IMHO changes to favor Bonds, I will switch back to a majority of bonds.
The only exception I have to this is about 20% in total bond market, and about 15% in old I Bonds that have 3-3.4% above the inflation rate
(and I will hold those until they mature).

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by nyclon » Tue Oct 17, 2017 12:00 pm

nisiprius wrote:
Mon Oct 16, 2017 6:53 am
drummerboy wrote:
Sun Oct 15, 2017 5:23 pm
In my 401k, I maintain some of my "safe" portfolio.

This typically consists of taxable bond funds, TIPS funds, etc.

This is part of my LP. Larry would of course recommend TIPS or ST Treasuries as part of this allocation.
I recognize that TIPS are to protect from "unexpected" inflation. Of course, the typical intermediate TIPS fund is not yielding much and is very volatile for a "safe" investment.

And short-term treasuries, liquid, but not much of a return. And the risk of short-term capital loss as the FED raises rates.

Why not just start a 5-year CD ladder in my 401k (@ Fidelity). It currently yields around 1.93% for a 5-year ladder. No loss of capital, FDIC insured. Yes, no inflation protection.

Would this be a better strategy?
A CD ladder instead of a short-term bond fund, an intermediate-term bond fund, or a TIPS fund are perfectly reasonable choices. Kevin M. has been arguing in the forum for some time that CDs are actually a better choice. Maybe, maybe not, but, no, you're not crazy, it is definitely reasonable.

I guess what I'm saying is that investment writers usually have blinkers on. They are thinking of or connected with "investment" firms, which actually provide specific kinds of investments--they're glorified stockbrokers that have expanded to offer bonds, mutual funds based on stocks and bonds, and other things. If you ask someone at Vanguard for a solution to an investing problem, they are going to tell you the best Vanguard mutual fund for that job. I think it's a combination of habit, familiarity, and self-interest. Advisory firms, for example, make money when they sell you mutual funds; they can't make money by telling you to put your money in a bank, or to buy United States series I savings bonds. So not only do they have a direct interest in preferring mutual-fund solutions, they also have no reason to have paid much attention to bank products or savings bonds.

With regard to inflation, everything depends on the time frame. Based on my personal experience with the double-digit inflation of the late 1970s, we had some pain regarding CDs and series EE savings bonds while inflation was rising, and we then had some joy when it started to fall--my wife had put some of my daughter's college money in an UGMA account in bank CDs, and when it came time to hand it over to my daughter, she was at first annoyed and thought my wife was foolish for having put the money into CDs, then astonished (and impressed) when she saw what the interest rate had been. I personally think it's crazy to buy non-inflation-adjused long-term bonds (e.g. 20 years), but a 5-year CD is a reasonable risk.

By the way, I'm not saying inflation isn't a risk--I think it's a big risk--but I hope you've noticed that people have been predicting inflation now since 2009 or so, and whenever you point out that despite QE2 or whatever there hasn't been any to speak of, people always just brush that aside and say "but watch out, it's just about to happen now, it's got to."

The biggest concern I personally have about CDs is that even though it has basically never happened, I think there is a chance that if interest rates rise really sharply, banks might begin denying early withdrawals from CDs. For decades now everybody has believe that CDs are just like demand deposits and that you have a right to get your money any time you like if you're willing to pay the penalty, but that's not necessarily true--there is often language about "at the bank's discretion" or "with the bank's permission" buried in the terms and conditions, and Ally added that language in 2012 while simultaneously telling columnist Allan Roth, verbally, that nothing had really changed. So I would be sure that you are in a situation where you will be fine if it should turn out that you are locked into the CD until it matures.
Hi Nisi,

There is often talk on bogleheads about the ambiguity around whether or not a bank will allow early withdrawal. Since I utilize CDs across a few banks, your post above finally made me look through the documentation of both Ally and GS Bank. I searched for the words "early", "discretion", and "permission" and also read through the agreements to understand any restrictions around early withdrawal - I couldn't find anything that indicated the bank may, at its sole discretion, say no to an early withdrawal of the full principal amount.

Do you have documentation which cites what you've written above regarding restrictions? I'd love to shed light on this with the forum in the form of actual CD deposit account agreements since it's such a hot topic, especially in today's environment; and many of us simply open 5 year CDs and treat them as demand deposits with a free put option.

Looking through these, I found nothing except some language in the GS agreement stating that early withdrawal of principal is "restricted" - but that likely was referencing the early withdrawal penalty, since, the same agreement explicitly stated that early withdrawal of principal is allowed.

https://www.ally.com/resources/pdf/bank ... eement.pdf
https://www.gsbank.com/content/dam/gsba ... eement.pdf
https://www.gsbank.com/content/dam/gsba ... t_2017.pdf

Thanks
nyclon

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by Katietsu » Tue Oct 17, 2017 2:51 pm


Hi Nisi,

There is often talk on bogleheads about the ambiguity around whether or not a bank will allow early withdrawal. Since I utilize CDs across a few banks, your post above finally made me look through the documentation of both Ally and GS Bank. I searched for the words "early", "discretion", and "permission" and also read through the agreements to understand any restrictions around early withdrawal - I couldn't find anything that indicated the bank may, at its sole discretion, say no to an early withdrawal of the full principal amount.

Do you have documentation which cites what you've written above regarding restrictions? I'd love to shed light on this with the forum in the form of actual CD deposit account agreements since it's such a hot topic, especially in today's environment; and many of us simply open 5 year CDs and treat them as demand deposits with a free put option.

Looking through these, I found nothing except some language in the GS agreement stating that early withdrawal of principal is "restricted" - but that likely was referencing the early withdrawal penalty, since, the same agreement explicitly stated that early withdrawal of principal is allowed.

https://www.ally.com/resources/pdf/bank ... eement.pdf
https://www.gsbank.com/content/dam/gsba ... eement.pdf
https://www.gsbank.com/content/dam/gsba ... t_2017.pdf

Thanks
nyclon

Read Ally B.2.f

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Re: Why not CDs instead of Short Term Bonds or TIPS

Post by nyclon » Tue Oct 17, 2017 3:36 pm

Katietsu wrote:
Tue Oct 17, 2017 2:51 pm

Hi Nisi,

There is often talk on bogleheads about the ambiguity around whether or not a bank will allow early withdrawal. Since I utilize CDs across a few banks, your post above finally made me look through the documentation of both Ally and GS Bank. I searched for the words "early", "discretion", and "permission" and also read through the agreements to understand any restrictions around early withdrawal - I couldn't find anything that indicated the bank may, at its sole discretion, say no to an early withdrawal of the full principal amount.

Do you have documentation which cites what you've written above regarding restrictions? I'd love to shed light on this with the forum in the form of actual CD deposit account agreements since it's such a hot topic, especially in today's environment; and many of us simply open 5 year CDs and treat them as demand deposits with a free put option.

Looking through these, I found nothing except some language in the GS agreement stating that early withdrawal of principal is "restricted" - but that likely was referencing the early withdrawal penalty, since, the same agreement explicitly stated that early withdrawal of principal is allowed.

https://www.ally.com/resources/pdf/bank ... eement.pdf
https://www.gsbank.com/content/dam/gsba ... eement.pdf
https://www.gsbank.com/content/dam/gsba ... t_2017.pdf

Thanks
nyclon

Read Ally B.2.f
Thanks. I didn't skim for "consent".

From Ally:
"Certificate of Deposit (CD) — This account allows you to make your account-opening deposit
by check, ACH transfer, transfer from another Ally deposit account or wire transfer. By opening
a CD, you have contracted to keep the deposited funds on deposit until the maturity date of the
CD. A partial withdrawal of principal before maturity is not permitted on any CD. While an actual
certificate is not issued, you will receive a funding letter with all the pertinent information about
the CD. Except for the Ally No Penalty CD, a withdrawal of the entire principal before maturity
will be permitted only with Ally’s consent and an interest penalty that is described in More About
Certificates of Deposit and IRA CDs, Section I.B.6, will apply.
"

and more

"You may not make a partial withdrawal of principal from a CD or IRA CD prior to the maturity date.
If we consent to the closure of a CD or IRA CD prior to the maturity date, we will redeem the CD
and impose a penalty."

From GS Bank, which includes Savings Accounts:
"The Bank also has the right to suspend
or restrict withdrawals, by any party, from any Online
Savings or CD Account at any time without notice and
your consent."

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