Originally Posted by floatingdoc
Is there a rule of thumb people here have used ? Is it better to just ladder at 1 year maturities?
It depends, because rates change and terms on the various CDs are different.
Right now, with the yield curve as steep as it is, it does seem like a much better deal to go with a 5-yr CD and pay the break fee than to ladder maturities. Be sure to read the fine print though. I've seen some CDs that have an early withdrawal fee equal to the "economic replacement value" of the CD, which is basically a market price that the bank determines at its sole discretion . . . I wouldn't own one of those unless I was sure the money was going to stay put for the duration.
In other cases the different fee structures might change how you look at the stated yield. For example, the 3.55% 5-yr CD from iGObanking.com carries a 6 month early withdrawal fee. That's a 1.78% hit which cuts the 1-yr yield in half if you take your money out early. Ally Bank, meanwhile, offers a 3.15% 5-yr CD with a 60 day break fee. So you're better off with Ally for money that you plan to pull out early and with iGO for money that is likely to sit around for several years.
So there is no rule of thumb as each product is different.
With respect to the FDIC insurance, I'm assuming it goes back down to $100K in 2013(?). It will probably get extended but I'm not putting myself in a position where I'll have to break CDs and move money around if it doesn't.