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10 year. 2.75% CD
Old 06-30-2013, 06:13 AM   #1
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10 year. 2.75% CD

Over the last few months I have been busing a few 10-year CDs. The rates have been around 2.3% or 2.5%. However, last week I found one at 2.75%. Are the long term CD rates finally going up?
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Old 06-30-2013, 06:45 AM   #2
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And if so, that begs the question as to whether locking a whole mess 'o money in at 2.75% for 10 years is a good idea if the reason why the rates are increasing is that we're on the verge of an inflationary phase.
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Old 06-30-2013, 07:56 AM   #3
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There obviously isn't much room for them to go lower - but they might. Could they stay the same - they might. Could they go higher - they might. Hence, the laddering concept is born...
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Old 06-30-2013, 08:04 AM   #4
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And if so, that begs the question as to whether locking a whole mess 'o money in at 2.75% for 10 years is a good idea if the reason why the rates are increasing is that we're on the verge of an inflationary phase.
Not really locked in--if rates rise one could sell and take the penalty (often only 3 months interest) to buy a new one at a higher rate.
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Old 06-30-2013, 08:05 AM   #5
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There was one last week at Schwab @ 3%/10yr, it sold out almost as soon as it was listed. Higher rates are seen occasionally for promotions. If rates really shot up, break the CD, take the penalty and reinvest.
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Old 06-30-2013, 08:18 AM   #6
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Or break the CDs when rates go up, and put half of the money in higher rate CDs, and the other half of the money in deferred annuities - while I am still in my 40s. My FIRE spreadsheet likes this approach very much.
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There was one last week at Schwab @ 3%/10yr, it sold out almost as soon as it was listed. Higher rates are seen occasionally for promotions. If rates really shot up, break the CD, take the penalty and reinvest.
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Old 06-30-2013, 03:40 PM   #7
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Or break the CDs when rates go up, and put half of the money in higher rate CDs, and the other half of the money in deferred annuities - while I am still in my 40s. My FIRE spreadsheet likes this approach very much.
I think if I had the income you have , I'd take the suze orman approach. Find a muni bond specialist, buy individual munis and let it ride.
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Old 06-30-2013, 03:43 PM   #8
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Nobody is tying up my cash for 10 years for that kind of interest rate!

Disclaimer: My cash allocation is ~15% of NW.
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Old 06-30-2013, 03:44 PM   #9
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Everyone should be aware that brokerage-sold CDs generally cannot be surrendered early. If you want out before maturity, you have to sell on the open market for whtever you can get and possibly take your lumps.
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Old 06-30-2013, 04:32 PM   #10
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I think if I had the income you have , I'd take the suze orman approach. Find a muni bond specialist, buy individual munis and let it ride.
I don't think anyone knows what the income is around here.
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Old 06-30-2013, 04:50 PM   #11
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I'd expect to see 3% CD rates with 10 year treasuries at 2.6%
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Old 06-30-2013, 04:53 PM   #12
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Everyone should be aware that brokerage-sold CDs generally cannot be surrendered early. If you want out before maturity, you have to sell on the open market for whtever you can get and possibly take your lumps.
+1 on that. If thru a broker account they are sold on the market and the rules are different. There should be a disclosure when you purchase.
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Old 07-01-2013, 09:19 AM   #13
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I bought a 5 year CD about 2 years ago yielding 2.25%. I swallowed hard at such a long commitment for such low interest. Today, it makes me look like a sharp investor.

I look at it this way, if I had to borrow money and could get it at less than 3% for 10 years would I take it? In a New York minute! Going the other way, I think it puts too much of the risk on the investor. But, hey, what do I know about predicting interest rates?
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Old 07-01-2013, 10:07 AM   #14
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Everyone should be aware that brokerage-sold CDs generally cannot be surrendered early. If you want out before maturity, you have to sell on the open market for whtever you can get and possibly take your lumps.
That's what I was told a few years back when I enquired about Vanguard's VBS available CD from some banks. Makes it sound like you are really buying a bond that reflects the forward expected interest rates.
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Old 07-01-2013, 03:28 PM   #15
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I laddered some 5 yr CD's 4 years ago and got:
2.87%
3.06%
2.67%
2.518%
2.48%
2.274%
1.6% (3 months ago)

My first is maturing in April...not likely to re-new. Glad I gradually got in now, didn't think so at the onset.
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Old 07-01-2013, 03:53 PM   #16
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Wow, you'd be willing to lock up money for 10 years? TEN? You'd have to be able to bail anytime after 1 year without giving up any earned interest or I wouldn't do this. Do you think that rates will be 2.75% in say 3 or 5 or 7 or 9 years from now? I don't. 3 or 4 years from now this could look like a lousy interest rate just like the rates of today look lousy.
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Old 07-02-2013, 03:55 AM   #17
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My assumption for planning purposes is that inflation will be in the 4-5% range for half of the next 10 years... I suppose you could always break the CD when that happens.
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Old 07-02-2013, 04:20 AM   #18
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I think if I had the income you have , I'd take the suze orman approach. Find a muni bond specialist, buy individual munis and let it ride.

I agree, without the Suze or income part.

But I fully agree otherwise !!
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Old 07-02-2013, 08:30 PM   #19
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It's much less than you think. Plus, I used to work in Europe, where salaries are much lower than they are here. I remember making a huge $40,000-50,000 per year in my late 20s in Europe about 25 years ago. I am aware that big accounting or law firms partners lurk around here, as well as very senior bankers, and I am sure that my pay slip pales in comparison to theirs. And that's ok, I am not racing against anyone. I would spend the same amount of money even if I earned twice as much of what I am making now.
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I think if I had the income you have , I'd take the suze orman approach. Find a muni bond specialist, buy individual munis and let it ride.
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Old 07-02-2013, 08:32 PM   #20
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My CDs average 2.8% for the next 10 years. Worry free. Can you say the same about your investments? :-)
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Nobody is tying up my cash for 10 years for that kind of interest rate!

Disclaimer: My cash allocation is ~15% of NW.
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