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Re: 6.25% CD ?
Old 12-29-2006, 10:59 AM   #41
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Re: 6.25% CD ?

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many might not be aware that in addition to a great rate, there are no early withdrawal penalties for IRA CDs if older than 59.5. further, the amount insured is $250k
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Unlike other financial institutions, Pentagon Federal allows members to take partial amounts from their IRA certificates, or qualified distributions, without an early withdrawal penalty.
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Re: 6.25% CD ?
Old 12-29-2006, 11:28 AM   #42
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Re: 6.25% CD ?

You guys locking in for 7 years?
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Re: 6.25% CD ?
Old 12-29-2006, 12:38 PM   #43
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Re: 6.25% CD ?

Quote:
Originally Posted by DOG52
You guys locking in for 7 years?
That's one of my decisions.....probably will, but I'll be working for 12 more yrs or so and I am doing the IRA, if I can get it funded before the deadline. I may do a ladder, but at 6.25, I don't see any benefit.
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Re: 6.25% CD ?
Old 12-29-2006, 03:06 PM   #44
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Re: 6.25% CD ?

1. Join NMFA? Check!
2. Join PenFed? Check!
3. Try to get info on CD and find how to fund my account (above the initial xfer)?

Hmmm... not so good there. Looking at website is not too informative, either; so, I'll have to call them Monday and see what I can do to get the account funded and then buy the 3 yr CD. Good rate! Beats the heck out of anything I see on Bankrate, which usually is a pretty good resource. Thanks for the tip.

[Edited to add]

Just got off the phone with Pen Fed and for me, looks like the easiest thing was just to print out the application form (from main menu) and I'll mail them a check and the form on Monday.

I don't want to turn this into a rant, but I have been having a lot of customer service issues with BofA lately, over multiple problems, and these folks at PenFed have just been terrific to talk to. I waited 12 minutes to get customer service from BofA today, then got disconnected, then tried again - ugh. Their website for online banking is completely hosed today... so, it is nice that some people want to serve you and are glad for your business. I recently opened a MM account with Zion's (5.15 APR%, and reqd min balance was trivial) and they were similarly polite and responsive like PenFed was about the CD. In fact, I miss using Credit Unions (was a CU member all my life, until I left the military) -- so maybe I will look into Zion's or PenFed for my primary checking, too.
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Re: 6.25% CD ?
Old 12-29-2006, 05:20 PM   #45
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Re: 6.25% CD ?

Quote:
Originally Posted by DOG52
You guys locking in for 7 years?
Yes, I plan on locking in for 7 years.
I dont need the money for anything, and it is much better than investing in savings bonds as I was planning on doing this year.

~M
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Re: 6.25% CD ?
Old 12-29-2006, 06:18 PM   #46
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Re: 6.25% CD ?

As some others have mentioned, I have had a wonderful experience with Pen Fed. They were most helpful and made me feel less dumb about having to ask a couple of questions. I asked the guy who helped me if they had been busy and he said the last couple of days had been pretty interesting!

We missed out on the earlier 6% CDs, because we were doing a transfer from another custodian, and we were unable to get everything set up and transferred in the time frame, so we are thrilled to have the opportunity to get in on the 6.25%. I took advantage of the opportunity to fund a large portion of my CD ladder for the next six years.
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Re: 6.25% CD ?
Old 12-29-2006, 09:54 PM   #47
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Re: 6.25% CD ?

How is interest paid; at maturity or semi anually?
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Re: 6.25% CD ?
Old 12-29-2006, 10:06 PM   #48
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Re: 6.25% CD ?

I may be posting in the wrong place, and I also may be showing my ignorance here, but I hope someone can answer a question:

First some background:

I recently moved some cash from my checking, where it was earning nada to a MM account, earning ~5.x%. I could move even more, don't know why I waited so long to do this.

I also am buying a 3yr CD paying 6.25% on Monday.

I also could buy a 1yr and also a 2 yr CD at around 6.0 - 6.125% from Fidelity in my brokerage acct if I take my 'winners' off the table. I just learned they have "brokerage CDs" (not a plug, but link included) with the advantage of no penalty for early withdrawal (except loss of any unpaid interest, of course)

http://personal.fidelity.com/product...nkbroker.shtml

So that leaves me:
instant liquidity in checking, (1/4 of cash)
easy reach liquidity in MM, (1/4 of cash)
a no-penalty CD mini- ladder for years 1 and 2, (1/4 of cash)
regular CD for year 3 (1/4 of cash)

I had just got through rebalancing my formerly all individual stock aggressive 401(k) AA to now include small, mid, large, int'l indexes, with a bond fund, at a 80/20 equity/bond split

I guess the question is that since I now can convert existing funds (brokerage acct + cash) outside my 401(k) to very safely earning more than the piddly 4% my bond fund was going to do inside of it, why should I keep *any* bonds in the 401(k)? I figure I will have between 20 to 25% of my overall net worth in cash-like funds, earning ~ 5.5% APR, and that could represent the non-correlated returns I need to allow stocks to go up and down and still have the diversification I should have... right?
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Re: 6.25% CD ?
Old 12-30-2006, 01:58 AM   #49
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Re: 6.25% CD ?

Quote:
Originally Posted by Roger that
How is interest paid; at maturity or semi anually?
Monthly.

Quote:
Originally Posted by DRiP Guy
I guess the question is that since I now can convert existing funds (brokerage acct + cash) outside my 401(k) to very safely earning more than the piddly 4% my bond fund was going to do inside of it, why should I keep *any* bonds in the 401(k)? I figure I will have between 20 to 25% of my overall net worth in cash-like funds, earning ~ 5.5% APR, and that could represent the non-correlated returns I need to allow stocks to go up and down and still have the diversification I should have... right?
You've seen the efficient frontier graphs, right?



That straight diagonal line they show on the left is the effect of adding cash. Risk free. Zero volatility. By definition, uncorrelated with all other assets.

If you believe this, then cash isn't a valid substitute for bonds. That risk-free stuff simply damps both volatility and returns. In theory.

In practice, there is no such thing as a risk-free asset with zero volatility. The return from cash varies with time.

So, yeah, cash could probably be used as a bond substitute, but not for the MPT purist.

Edit: learned to spell "diagonal."
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Re: 6.25% CD ?
Old 12-30-2006, 07:48 AM   #50
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Re: 6.25% CD ?

Awesome, thanks for the lucid reply. I have indeed recently bumped up against the "Efficient Frontier" concept as part of my very recent FI/RE introduction, and, coming from an engineering background, it seemed to make good sense conceptually (as I understood it), and is largely why I finally rebalanced and added bonds.

As you say, the words "Risk Free Return" seems to me like the concept of "efficient markets" or "4% SWR" -- I consider them each approximations to get across broad concepts and not absolute guarantees. Indeed, I find it amusing that some people pretend to think EMT means no one can ever earn any money trading/timing, because they act as if the efficiency must mean 100% as well as instantaneous. Of course as a real world system with inertia and inherent drag and hysterisis (yes, inefficiencies), it could not be. Doesn't mean the concept is not 'true', just like the historical SWR data is what it is?

But I digress wildly here -- back to this bonds versus cash thing, though, I fear I may not have truly understood the EF yet.

1. With those highly liquid assets, that can obtain a Risk Free rate in Money Markets and CDs to blow away all of the bond fund choices that I could find myself, if I knew nothing of Efficient Frontier, I would certainly not go bonds, just considering risk/return on those two alternatives on their own.

2. That said, does the exclusion of those cash equivalents from the drivers of the parabola have perhaps a much deeper significance I am missing, as to why I should treat my portfolio as standing apart from the totality of my investments + cash? As I approach potential ER, I tend to want to look at my finances holistically, so that I don't stress over any one thing needlessly.

Thanks in advance, and sorry if I am being thick on this. If the best answer is: "Hey, educate yourself first, you don't know even enough to discuss this yet, read X article, or Y book", I'll let it go at that.

Thanks!

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Re: 6.25% CD ?
Old 12-30-2006, 08:59 AM   #51
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Re: 6.25% CD ?

You are missing something real simple. Cash equivalents return yield only. Bonds return yield plus/minus capital gain/loss. The cap gain/loss has historically offset a good bit of equity cap gain/loss.
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Re: 6.25% CD ?
Old 12-30-2006, 09:03 AM   #52
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Re: 6.25% CD ?

Quote:
Originally Posted by brewer12345
You are missing something real simple. Cash equivalents return yield only. Bonds return yield plus/minus capital gain/loss. The cap gain/loss has historically offset a good bit of equity cap gain/loss.
Doh.



(Thanks)
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Re: 6.25% CD ?
Old 12-30-2006, 10:15 AM   #53
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Re: 6.25% CD ?

Quote:
Originally Posted by DRiP Guy
I just learned they have "brokerage CDs" (not a plug, but link included) with the advantage of no penalty for early withdrawal (except loss of any unpaid interest, of course)


You may wish to check with Fidelity but if their CDs are like Schwabs, there is no early withdrawal penalty but the value of the CD becomes subject to the market. If you are selling the CD because interest rates are higher and you want to reinvest in a higher yielding CD, it is likely that the value of your existing CD will be less than you thought---in which case, it does act somewhat like a bond. (sorry, doesn't look like I've figured how to do this quote biz yet)
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Re: 6.25% CD ?
Old 12-30-2006, 04:00 PM   #54
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Re: 6.25% CD ?

Quote:
Originally Posted by kaneohe
You may wish to check with Fidelity but if their CDs are like Schwabs, there is no early withdrawal penalty but the value of the CD becomes subject to the market. If you are selling the CD because interest rates are higher and you want to reinvest in a higher yielding CD, it is likely that the value of your existing CD will be less than you thought---in which case, it does act somewhat like a bond. (sorry, doesn't look like I've figured how to do this quote biz yet)
Good Point Kaneohe........Fidelity's Description of Brokerage CD:
Although a brokerage CD will return an investor's principal at maturity, its value if sold prior to maturity will fluctuate based on size, time remaining before maturity and the level of interest rates.

I did some checking the other day when this thread validated the PenFed CD rate, and I did not find any CD rates at Fidelity even close to DripGuy quoted.
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Re: 6.25% CD ?
Old 12-30-2006, 04:37 PM   #55
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Re: 6.25% CD ?

I've looked at the brokerage CDs from Vanguard and they always seem to offer significantly less than the best rates from bankrate.com or one-off offers like the one from PenFed.

My sense is that they are a convenience offering for people who don't want to hunt for the best rate. Better than sticking with the local bank, but not the best option.

Thanks to everybody for digging up and researching this great PenFed offer. I'll be signing up soon.

FYI, I made a small contribution to dory's server fund a while back, but finding this deal alone could cover for my "dues" to the forum for several years.

Jim
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Re: 6.25% CD ?
Old 12-30-2006, 04:54 PM   #56
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Re: 6.25% CD ?

Thanks, magellan..........I agree and have also made a contribution to the great resource.

...........still can't locate those 6.0-6.125 1yr and 2yr Fidelity CD's that dripGuy mentioned. This could help me as I am not sure if I can get a rollover completed in time to fund a PenFed CD
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Re: 6.25% CD ?
Old 12-30-2006, 06:10 PM   #57
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Re: 6.25% CD ?

Quote:
Originally Posted by jazz4cash
Thanks, magellan..........I agree and have also made a contribution to the great resource.

...........still can't locate those 6.0-6.125 1yr and 2yr Fidelity CD's that dripGuy mentioned. This could help me as I am not sure if I can get a rollover completed in time to fund a PenFed CD
I clearly might be misunderstanding something, but it looks like there is a 6% and a 6.125% among these - must admit I have not read the fine print, but I think it also said FDIC insured to $250,000. sorry for terrible formating:


http://fixedincome.fidelity.com/fi/F...isplay?name=CD

Quote:
Disclosure Document (PDF)

# All New Issue CDs offered by Fidelity are fee-free.*
# Minimum investment amount is typically one CD.

* Learn more about CDs
* Participating in New Issue Offerings
* Learn about and sign up for fixed income alerts




Total Offerings Found: 6 * As of 12/30/2006 at 07:06 p.m.


Description Coupon Coupon Frequency Maturity Date sort down Rating Price Expected
Yield Call
Protected Settlement Date Quantity Available Attributes
Moody's S&P

5 Trade COUNTRYWIDE BANK VA 6.000000 01/26/2022 01/26/2007 6.000 SEMIANNUAL 01/26/2022 NR NR 100.000 6.000 No 01/26/2007 380 T1 SFP FDIC
6 Trade MIDFIRST BANK 6.125000 01/19/2027 01/19/2007 6.125 SEMIANNUAL 01/19/2027 NR NR 100.000 6.125 No 01/19/2007 2,043 T1 SFP FDIC SKY

FDIC now insures CDs for principal and accrued interest up to $250,000 per account owner per institution for depository assets held in qualifying retirement accounts such as traditional or Roth IRAs.
Page 10 here [caution - PDF file] shows one at 6.05% APY from Midfirst Bank direct, don't need to go through Fidelity. Note is callable 06/07, so if they don't need your money, you would get it back early, but still....

http://www.amuni.com/frameset_new.htm

Quote:
Callable CDs

To help you earn the highest rate for your investment dollars, MidFirst offers Callable CDs. MidFirst's Callable CDs require a minimum opening balance of $5,000. The callable feature allows MidFirst to redeem the CD at the time of the call option or anytime thereafter. If the CD is called, you are still guaranteed the stated annual percentage yield for the investment period.

Review "CD Rates" or for more information contact your personal banker or the MidFirst MoneyLine at 1-888-MIDFIRST option 6.
https://www.midfirst.com/PersonalBanking/CDIRA/CDs.asp





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Re: 6.25% CD ?
Old 12-30-2006, 06:52 PM   #58
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Re: 6.25% CD ?

Check the Maturity Dates.........

The Countrywide Bank 6.0 Coupon matures in 2022.....a 15 yr CD
The Midfirst Bank 6.125 Coupon matures in 2027.........a 20 yr CD

I guess that's not bad, but I thought you found something much shorter.
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Re: 6.25% CD ?
Old 12-30-2006, 07:06 PM   #59
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Re: 6.25% CD ?

Quote:
Originally Posted by jazz4cash
Check the Maturity Dates.........

The Countrywide Bank 6.0 Coupon matures in 2022.....a 15 yr CD
The Midfirst Bank 6.125 Coupon matures in 2027.........a 20 yr CD

I guess that's not bad, but I thought you found something much shorter.
Yes, I did want shorter myself (12/24 mo) . When I saw the maturity dates on the underlying instrument, I went back to the Fidelity description, and according to what I understood, they are the ones buy a huge package of these to hold to that maturity, and they are 'repackaging' part of it to sell to me, hence the 'brokerage CD' term. I further thought I saw maturities of one and two years, but maybe that is what I glitched on, because how they could make any money on that proposition would be beyond me, so clearly I must be missing something, and I have said that in each post I made on the topic.

I also am leery of this disclaimer language:
Quote:
If your CD has a maturity date of more than one year from the date of issue, the pre-maturity sale price may be less than its original purchase price, particularly if interest rates are higher at the time of sale. The secondary market may also be limited. Fidelity currently makes a market in this CD but may not do so in the future.
I am trying to see where I got the shorter maturity info, but doing so find myself up to my eyeballs in info on the Fidelity site on CDIPS, CATS and TIGERS - stuff that sounds like it ought to be in a zoo, not my accounts...

A Pen Fed ladder maybe is looking good...

[Edited to add] Yup, sorry for the excursion, folks, looks like I was off in the weeds on the Fidelity thing. For their 1 yr 'brokerage' CD product, they say the yield is 5.2%.


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Re: 6.25% CD ?
Old 12-31-2006, 04:09 AM   #60
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Re: 6.25% CD ?

Quote:
Originally Posted by magellan
FYI, I made a small contribution to dory's server fund a while back, but finding this deal alone could cover for my "dues" to the forum for several years.
Every time this board leads me to a profitable investment, I share a little with the server fund.

It beats sharing commissions with the brokerage.
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