CD Laddering where

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LiveSimple
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CD Laddering where

Post by LiveSimple » Tue Mar 24, 2020 9:41 am

What will be the best approach to create a CD ladder

1. With Brick & Mortar banks
2. Online Banks
3. Fidelity fixed income CD ladder

Fidelity seems simpler, not sure of the rates though ?

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Sandtrap
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Location: Hawaii No Ka Oi , N. Arizona

Re: CD Laddering where

Post by Sandtrap » Tue Mar 24, 2020 9:51 am

LiveSimple wrote:
Tue Mar 24, 2020 9:41 am
What will be the best approach to create a CD ladder

1. With Brick & Mortar banks
2. Online Banks
3. Fidelity fixed income CD ladder

Fidelity seems simpler, not sure of the rates though ?
Any of them, or combination of 1-3, with the best rates and terms.

The advantages of using the brokerages are:
1. On maturity, instead of auto renew, funds go into the sweep accounts. (in case you forget)
2. The FDIC 250k limit can be handled in one brokerage location using various banks/etc, vs one brick and mortar bank with a 250k limit.
(although if a trust account the FDIC limit becomes 250k per beneficiary)
3. The brokerages have a simple app/interface for CD ladder construction.
4 etc.

Fidelity and other brokerages have a "fixed rate" page/chart.
Check these.

Fidelity Fixed Rates
https://fixedincome.fidelity.com/ftgw/fi/FILanding

Vanguard Fixed Rates
https://personal.vanguard.com/us/FixedIncomeHome

BankRate.com
https://www.bankrate.com/banking/cds/cd-rates/

Forum Wiki: CD Laddering and Bond Laddering (how to)
https://www.bogleheads.org/wiki/Laddering_bonds_or_CDs

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

DaftInvestor
Posts: 5067
Joined: Wed Feb 19, 2014 10:11 am

Re: CD Laddering where

Post by DaftInvestor » Tue Mar 24, 2020 10:30 am

Sandtrap wrote:
Tue Mar 24, 2020 9:51 am
LiveSimple wrote:
Tue Mar 24, 2020 9:41 am
What will be the best approach to create a CD ladder

1. With Brick & Mortar banks
2. Online Banks
3. Fidelity fixed income CD ladder

Fidelity seems simpler, not sure of the rates though ?
Any of them, or combination of 1-3, with the best rates and terms.

The advantages of using the brokerages are:
1. On maturity, instead of auto renew, funds go into the sweep accounts. (in case you forget)
2. The FDIC 250k limit can be handled in one brokerage location using various banks/etc, vs one brick and mortar bank with a 250k limit.
(although if a trust account the FDIC limit becomes 250k per beneficiary)
3. The brokerages have a simple app/interface for CD ladder construction.
4 etc.

Fidelity and other brokerages have a "fixed rate" page/chart.
Check these.

Fidelity Fixed Rates
https://fixedincome.fidelity.com/ftgw/fi/FILanding

Vanguard Fixed Rates
https://personal.vanguard.com/us/FixedIncomeHome

BankRate.com
https://www.bankrate.com/banking/cds/cd-rates/

Forum Wiki: CD Laddering and Bond Laddering (how to)
https://www.bogleheads.org/wiki/Laddering_bonds_or_CDs

j :happy
In my opinion the better rates of the online banks FAR outweigh the advantages above (although I am certainly not carrying the 250K limit).

For #1 above - all the online banks I have used now allow you to designate what to do with a fund upon maturity. It will auto-renew if you want it to (and they start with this as default) but you can designate what you want to do with the money via a simple online drop-down (and sweeeping it into a HY-Online savings account - or pulling it back to your central account - are always auto-options).

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LiveSimple
Posts: 1528
Joined: Thu Jan 03, 2013 7:55 am

Re: CD Laddering where

Post by LiveSimple » Tue Mar 24, 2020 10:30 am

Sandtrap wrote:
Tue Mar 24, 2020 9:51 am
Fidelity and other brokerages have a "fixed rate" page/chart.
Check these.

Fidelity Fixed Rates
https://fixedincome.fidelity.com/ftgw/fi/FILanding

Vanguard Fixed Rates
https://personal.vanguard.com/us/FixedIncomeHome

BankRate.com
https://www.bankrate.com/banking/cds/cd-rates/

Forum Wiki: CD Laddering and Bond Laddering (how to)
https://www.bogleheads.org/wiki/Laddering_bonds_or_CDs

j :happy
Appreciate the input Sandtrap !!!

Leaning towards the Fidelity Fixed Income CD laddering, for the simplicity.

Will see !!!

DaftInvestor
Posts: 5067
Joined: Wed Feb 19, 2014 10:11 am

Re: CD Laddering where

Post by DaftInvestor » Tue Mar 24, 2020 10:36 am

LiveSimple wrote:
Tue Mar 24, 2020 10:30 am

Leaning towards the Fidelity Fixed Income CD laddering, for the simplicity.

Will see !!!
Just take a quick look at marcus.com and some other onlines before choosing. I am all for simplicity but with a 1.85% rate versus 1.3% rate (12 month example) difference you should know how much you are paying for simplicity before making a decision.

keepingitsimple
Posts: 210
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Re: CD Laddering where

Post by keepingitsimple » Tue Mar 24, 2020 10:39 am

LiveSimple wrote:
Tue Mar 24, 2020 9:41 am
What will be the best approach to create a CD ladder

1. With Brick & Mortar banks
2. Online Banks
3. Fidelity fixed income CD ladder

Fidelity seems simpler, not sure of the rates though ?
Typically I have found it more convenient to set up a CD ladder at a brokerage. That way everything is in one place and easy to track. However, a rudimentary spread sheet can accomplish the same thing, regarding tracking. With that being said, over the past year I have found superior CD rates at local credit unions and have been investing in those as CD's in my brokerage account mature.

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LiveSimple
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Re: CD Laddering where

Post by LiveSimple » Wed Mar 25, 2020 9:10 am

Appreciate all the input....

cableguy
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Re: CD Laddering where

Post by cableguy » Wed Mar 25, 2020 10:51 am

Fidelity has a good program with simple tools and look ups on their site. Make sure you understand FDIC coverage and callable or call protected. Most of them are FDIC protected. Callable meaning if rates go down, the bank can call or break the CD and force you to cash so they don't have to pay you the interest rate. I have a 5 year ladder and I've been burned once or twice because I wasn't paying attention to the callable question. Goldman Sachs, Morgan Stanley, etc. that are very quick to call the CD if the CD rate is higher than market rates.

J295
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Re: CD Laddering where

Post by J295 » Wed Mar 25, 2020 11:47 am

We use Fidelity.
Have a five-year CD ladder.
It’s simple and convenient for us.
We don’t spend many brain cells concerning ourselves with the rates, so long as they are reasonably competitive. A few basis points of course is real money, but the function of our non-equity portfolio, including CDs, is more of a ballast.

vipertom1970
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Re: CD Laddering where

Post by vipertom1970 » Wed Mar 25, 2020 11:52 am

+1 for Fidelity...….quick and easy.

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FelixTheCat
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Re: CD Laddering where

Post by FelixTheCat » Wed Mar 25, 2020 12:15 pm

For you Fidelity folks, what CD ladder do you use? 1 Year? 2 Year? 5 Year?
Felix is a wonderful, wonderful cat.

dbr
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Joined: Sun Mar 04, 2007 9:50 am

Re: CD Laddering where

Post by dbr » Wed Mar 25, 2020 12:22 pm

FelixTheCat wrote:
Wed Mar 25, 2020 12:15 pm
For you Fidelity folks, what CD ladder do you use? 1 Year? 2 Year? 5 Year?
The general theory of a ladder is to have all the CDs (or bonds) as long as possible but having one step mature every year. Otherwise it isn't a ladder but rather just a single CD (or set of CDs). A ladder of one year CDs doesn't really exist.

Here is a discussion in the context of bonds, but CDs work the same: https://www.investopedia.com/investing/ ... t-returns/

cableguy
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Re: CD Laddering where

Post by cableguy » Wed Mar 25, 2020 12:23 pm

5 year.

dbr
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Re: CD Laddering where

Post by dbr » Wed Mar 25, 2020 12:26 pm

cableguy wrote:
Wed Mar 25, 2020 12:23 pm
5 year.
Right. They don't offer anything longer.

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FelixTheCat
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Re: CD Laddering where

Post by FelixTheCat » Wed Mar 25, 2020 12:27 pm

dbr wrote:
Wed Mar 25, 2020 12:22 pm
FelixTheCat wrote:
Wed Mar 25, 2020 12:15 pm
For you Fidelity folks, what CD ladder do you use? 1 Year? 2 Year? 5 Year?
The general theory of a ladder is to have all the CDs (or bonds) as long as possible but having one step mature every year. Otherwise it isn't a ladder but rather just a single CD (or set of CDs). A ladder of one year CDs doesn't really exist.

Here is a discussion in the context of bonds, but CDs work the same: https://www.investopedia.com/investing/ ... t-returns/
Fidelity has 3 sets of CD ladders and they pay different rates. I was wondering what most people do.

Fidelity has a one year ladder. 3 month, 6 month, 9 month and 1 year CD.
Felix is a wonderful, wonderful cat.

vipertom1970
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Re: CD Laddering where

Post by vipertom1970 » Wed Mar 25, 2020 12:34 pm

I do max 1 year CD ladder for liquidity.
Last edited by vipertom1970 on Wed Mar 25, 2020 1:17 pm, edited 1 time in total.

Dottie57
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Re: CD Laddering where

Post by Dottie57 » Wed Mar 25, 2020 1:10 pm

LiveSimple wrote:
Tue Mar 24, 2020 10:30 am
Sandtrap wrote:
Tue Mar 24, 2020 9:51 am
Fidelity and other brokerages have a "fixed rate" page/chart.
Check these.

Fidelity Fixed Rates
https://fixedincome.fidelity.com/ftgw/fi/FILanding

Vanguard Fixed Rates
https://personal.vanguard.com/us/FixedIncomeHome

BankRate.com
https://www.bankrate.com/banking/cds/cd-rates/

Forum Wiki: CD Laddering and Bond Laddering (how to)
https://www.bogleheads.org/wiki/Laddering_bonds_or_CDs

j :happy
Appreciate the input Sandtrap !!!

Leaning towards the Fidelity Fixed Income CD laddering, for the simplicity.

Will see !!!
I’ve used Fidelity brokerage CDs and been happy. Just realize you can’t break a CD. You CAN sell it - but price may vary.

jimkinny
Posts: 1328
Joined: Sun Mar 14, 2010 1:51 pm

Re: CD Laddering where

Post by jimkinny » Wed Mar 25, 2020 1:18 pm

I would go with the institution that has the highest rates balanced with convenience when I was purchasing the CDs. I use Ally and Vanguard.

Unless you intend to spend the money once a CD matures, consider just buying the longer maturities unless a shorter term has a nearly identical rate to the longer term and even then, the longer term may be advantageous.

I initially had a ladder of sorts but gave it up quickly and started buyer longer maturities for the higher yield including 6-10 year CDs in a brokerage account. Those 6-10 year CDs are pretty scarce now if there are any at all.

Mostly you can pay a penalty and redeem a CD (or sell from a brokerage account) and reinvest if rates rise. There is no guarantee that you will be allowed to redeem early so there is that risk.

The boglehead wiki has a break even calculator for determining if an early redemption is advantageous despite a penalty (I think).

eldinerocheapo
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Re: CD Laddering where

Post by eldinerocheapo » Wed Mar 25, 2020 3:52 pm

We've been with Ally for about six years now and have laddered cd's from one to five years with some pretty good rates. They offer Select 13 month cd's once in awhile, and these are generally half a percent higher than the 1yr cd's. Easy to transfer funds between them and BOA with the MM too. I'm pleased with their rates and service.

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