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Brokered CD vs Bank CD
Old 05-09-2018, 05:48 PM   #1
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Brokered CD vs Bank CD

1. What are the disadvantages/advantages of Brokered CDs compared to Bank CDs? 2. Would it be better to buy a CD at the maximum covered by FDIC or buy several at lower amounts that total the maximum covered by FDIC? 3. Can both my wife and I buy CDs in the same account with each at the maximum covered by FDIC and still be covered?

I'm comfortable with Bank CDs but I have been recommended to buy Brokered CDs by a brokerage firm and I don't know anything about them and therefore don't feel comfortable.

At 70 years we are probably 50/40/10 (stock/bond/cash mostly in IRAs) with more than enough to satisfy our present and future needs and will soon have to decide what to do with about $800k+ inheritance. We don't need to buy more stock to increase our net worth but just want to preserve what we have. Most of our investments will go to the children. Laddered CDs seem to be a good path for this new money.

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Old 05-09-2018, 06:18 PM   #2
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I can't answer all your questions, but the thing I like about a brokered CD over a bank CD is the ease of purchase. One click in my Schwab account, and I'm done.

I'm not at the point where I need to worry about the FIDC insurance caps, but I'll be checking in to see the answer to that question. I'm wondering if since you can by them from many banks, if you're insured up to the max at each bank versus your total at the brokerage house - which presumably would be made up of multiple CDs from various banks. I have three at Schwab now and all three are from different banks.
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Old 05-09-2018, 06:45 PM   #3
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Quote:
Originally Posted by Jerry1 View Post
I can't answer all your questions, but the thing I like about a brokered CD over a bank CD is the ease of purchase. One click in my Schwab account, and I'm done.

I'm not at the point where I need to worry about the FIDC insurance caps, but I'll be checking in to see the answer to that question. I'm wondering if since you can by them from many banks, if you're insured up to the max at each bank versus your total at the brokerage house - which presumably would be made up of multiple CDs from various banks. I have three at Schwab now and all three are from different banks.
The insurance is calculated by summing up all accounts and CDs you have at a particular bank including brokered CDs So say you have 50k in a regular checking account and 100k in brokered cds you would have 150k in terms of FDIC insurance on accounts in the bank.
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Old 05-09-2018, 09:04 PM   #4
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A rather lengthy explanation on brokered CD’s from, in this case, Schwab. You may call Schwab directly to get your specific questions answered. The way I read it is that the $250k limit is by financial institution holding the CD, in my case I bought brokered CD’s from Schwab that were issued by Wells Fargo, thus my limit is with Wells Fargo, not Schwab.
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Old 05-09-2018, 11:41 PM   #5
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After reading another thread on this site it made me check our own CD in our Rev Trust. I called FDIC and found out my bank was wrong and we were underinsured for the full amount. Just did this last week and had to amend our trust to be fully insured. Too many variables to explain here but I would call FDIC.gov yourself and not trust your bank to give you correct info as FDIC rep told me banks always give out incorrect info. The brokered CD's seem to be higher currently. Don't know if that is always the case though.
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Old 05-11-2018, 03:28 PM   #6
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Possibly quirky tax implications. For example, in Philly, interest on CDs directly held is not subject to city tax, however, if held via a third party like a broker the interest is taxable
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