IRA Certificates?

[early_retirement_or_bust]

Has anyone bought IRA certificates? Any pros/cons to this? Also...

1) Is this too conservative an investment for the younger set?
2) Are the dividends noticeable?
3) Have you chosen to do these over CDs? Why?

Thanks!

[REWahoo]

Who is issuing the certificates?

[pb4uski]

Haven't heard the term. Is it a bank certificate of deposit held in an IRA account? If so, I have some PenFed 3%ers.

If one has some bond/fixed income allocation it might not be a bad way to go but when I was young I was 100% equities.

[bingybear]

Quote:

Originally Posted by early_retirement_or_bust Has anyone bought IRA certificates? Any pros/cons to this? Also... 1) Is this too conservative an investment for the younger set? 2) Are the dividends noticeable? 3) Have you chosen to do these over CDs? Why? Thanks!

Are the IRA certificates just CD's purchased in an IRA? Some places provide a little better rate in an IRA. I've just not run across this term. But then again, I don't own CDs in my IRAs.
What is the rate and who is offering the IRA certs? Who if anyone is backing them (FDIC?)

[early_retirement_or_bust]

Quote:

Originally Posted by REWahoo Who is issuing the certificates?

Looking at Navy Federal

[early_retirement_or_bust]

Quote:

Originally Posted by bingybear Are the IRA certificates just CD's purchased in an IRA? Some places provide a little better rate in an IRA. I've just not run across this term. But then again, I don't own CDs in my IRAs. What is the rate and who is offering the IRA certs? Who if anyone is backing them (FDIC?)

Navy Federal is offering 3% and they're FDIC insured.

[early_retirement_or_bust]

Quote:

Originally Posted by pb4uski Haven't heard the term. Is it a bank certificate of deposit held in an IRA account? If so, I have some PenFed 3%ers. If one has some bond/fixed income allocation it might not be a bad way to go but when I was young I was 100% equities.

The certificates would be shares into the credit union you buy them from. They are similar to bank CDs.

[bingybear]

Quote:

Originally Posted by early_retirement_or_bust Navy Federal is offering 3% and they're FDIC insured.

no... says NCUA insured, not fdic. Different organizations, both reputable.
It looks like you talking about buying a CD in your IRA.
Obvious next question is where are you at in your investing life?
Do you have an emergency fund? Enough (6 to 12 month living expenses?)
Have you invested in things other than CDs and savings accounts?
Have you determined an asset allocation for your investments?

[pb4uski]

I see... I think what you are talking about would just be an IRA that holds CDs issued by Navy Federal. At your young age I would go with a low-cost stock mutual fund. I use Vanguard but many here like Fidelity.

[REWahoo]

Quote:

Originally Posted by early_retirement_or_bust Has anyone bought IRA certificates?

Yes, many of us here purchased 5 year, 3% IRA certificates of deposit from Pentagon Federal CU when they offered them a couple of years ago. Navy may have offered something similar previously but I'm not a member so couldn't take advantage of them.

Quote:

Originally Posted by early_retirement_or_bust 1) Is this too conservative an investment for the younger set?

For someone your age, they are very conservative, but could be a good place for some "safe" money - some small portion of your investment portfolio. It depends on your risk tolerance. As others indicate, at your age you need to consider investing in equities once you have a good emergency fund set aside.

Quote:

Originally Posted by early_retirement_or_bust 2) Are the dividends noticeable?

Depends on how big the certificate is - buy a million $ certificate and you'll get $2,500 a month.

Quote:

Originally Posted by early_retirement_or_bust 3) Have you chosen to do these over CDs? Why?

The reason I chose them (the PenFed certificates) was the interest rates. No one else offered anything close.

[early_retirement_or_bust]

Quote:

Originally Posted by bingybear no... says NCUA insured, not fdic. Different organizations, both reputable. It looks like you talking about buying a CD in your IRA. Obvious next question is where are you at in your investing life? Do you have an emergency fund? Enough (6 to 12 month living expenses?) Have you invested in things other than CDs and savings accounts? Have you determined an asset allocation for your investments?

My mistake. And this is something I was looking at doing around this time next year, because I am not ready to do this for at least several months (in my intro post, I definitely put it all out there...I am way behind the 8 ball on savings). I am building my emergency fund (only 3-4 months now). I have an IRA and 401(k). Most of my retirement assets are in stocks...very little in bonds, which is why I was worried that I should have some safety net of sorts.

[early_retirement_or_bust]

Quote:

Originally Posted by REWahoo Yes, many of us here purchased 5 year, 3% IRA certificates of deposit from Pentagon Federal CU when they offered them a couple of years ago. Navy may have offered something similar previously but I'm not a member so couldn't take advantage of them. For someone your age, they are very conservative, but could be a good place for some "safe" money - some small portion of your investment portfolio. It depends on your risk tolerance. As others indicate, at your age you need to consider investing in equities once you have a good emergency fund set aside. Depends on how big the certificate is - buy a million $ certificate and you'll get $2,500 a month. The reason I chose them (the PenFed certificates) was the interest rates. No one else offered anything close.

I'll look into doing this in another 5-10 years instead of late next year then. I am just panicky about the market, but need to understand I have time on my side (for now). Thanks!

[RunningBum]

3% isn't bad. If you were considering bonds, I'd probably go with this as an alternative. Others refer to your young age, but I don't see where you mentioned that. Assuming under 30, you could easily be 100% stocks but 10-20% bonds/CDs/etc isn't a bad allocation either.

[REWahoo]

Quote:

Originally Posted by early_retirement_or_bust I am just panicky about the market, but need to understand I have time on my side (for now). Thanks!

There is absolutely no reason to be panicky about the market, especially at your age.

If you can't figure out an asset allocation that allows you not to worry, you need to give up on investing in the market and consider real estate (becoming a landlord), an inheritance, marrying rich or getting lucky on the lottery.

[early_retirement_or_bust]

Quote:

Originally Posted by REWahoo There is absolutely no reason to be panicky about the market, especially at your age. If you can't figure out an asset allocation that allows you not to worry, you need to give up on investing in the market and consider real estate (becoming a landlord), an inheritance, marrying rich or getting lucky on the lottery.

My fiance and I have been fixing up a rental property I bought (it was only $7k and in good condition, so a no-brainer here) lol. Fiance is not rich, but a much better saver than me. haha

In all seriousness, I will stay the course. The more I read here, the more upset with myself that I missed out on so much money in previous years.

[hnzw_rui]

Do you have an emergency fund? If not, can you fully fund both IRA and taxable EF at the same time?

If you don't have an EF and can't fully fund your IRA, I would suggest getting the CDs and putting them in Roth IRA for now just so you don't lose the tax-free space. Then when you're able to fund a taxable EF while making full contributions to your IRA, rollover the money from the Roth IRA CDs to Vanguard for investing.

If you already have an EF, then just invest the money.

[early_retirement_or_bust]

Quote:

Originally Posted by RunningBum 3% isn't bad. If you were considering bonds, I'd probably go with this as an alternative. Others refer to your young age, but I don't see where you mentioned that. Assuming under 30, you could easily be 100% stocks but 10-20% bonds/CDs/etc isn't a bad allocation either.

28

[OAG]

Quote:

Originally Posted by early_retirement_or_bust Navy Federal is offering 3% and they're FDIC insured.

Where did you see NFUC @ 3% best I saw is 2.5% APY @ 7 years.

Buying IRA CD's at NFCU and Pentagon FCU is simple and easy (at least as easy as buying a regular CD from either). FYI I have ROTH and Traditional IRA accounts at PFCU. They even provide the RMD's on a Annual, Semi Annual, Quarterly or Monthly transfer between accounts or ACH to an outside Account or a Check,

[jazz4cash]

Quote:

Originally Posted by OAG Where did you see NFUC @ 3% best I saw is 2.5% APY @ 7 years. Buying IRA CD's at NFCU and Pentagon FCU is simple and easy (at least as easy as buying a regular CD from either). FYI I have ROTH and Traditional IRA accounts at PFCU. They even provide the RMD's on a Annual, Semi Annual, Quarterly or Monthly transfer between accounts or ACH to an outside Account or a Check,

Navy Fed's 3% offer is very limited:
Special EasyStartSM Certificate

Start building your long-term savings quickly and easily with a 3.00% APY
Special EasyStart Certificate.1

• $50 minimum
• 12-month term
• $3,000 maximum balance

Requires Checking and Direct Deposit/Allotment.