floatingdoc
Recycles dryer sheets
- Joined
- Oct 25, 2009
- Messages
- 58
I have some of my stash going to cd's. I have heard it might be better to just go long (5 years) and break the cd with the resultant penalty instead of laddering. I have been looking at this approach. My problem is I think it would be tempting to get out as soon as I see a substantial rate increase. Say 75 bp. With a 3% 5 year cd, the penalty would put me at a 1 year break even point. I suppose that is an incentive to just stay with it.
New cd 5% (wishful thinking).
Break 3.3 cd costs 1.65% in interest (6months)
Break even is roughly 6 months.
Is there a rule of thumb people here have used ? Is it better to just ladder at 1 year maturities?
best rates from bankrate.com
1y 1.7
2y 2.05 (upgrade once if rates go up per ally)
3y 2.60
4y 3.03
5y 3.55
The other problem is fdic insurance. What is the chance of the 250k BECOMING PERMANENT. It's not that big a problem to spread it among multiple banks.
New cd 5% (wishful thinking).
Break 3.3 cd costs 1.65% in interest (6months)
Break even is roughly 6 months.
Is there a rule of thumb people here have used ? Is it better to just ladder at 1 year maturities?
best rates from bankrate.com
1y 1.7
2y 2.05 (upgrade once if rates go up per ally)
3y 2.60
4y 3.03
5y 3.55
The other problem is fdic insurance. What is the chance of the 250k BECOMING PERMANENT. It's not that big a problem to spread it among multiple banks.