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Old 12-24-2013, 08:58 AM   #181
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I think so, but don't forget to also fill out the IRA Account Application on page 11.

For those of you commenting on the time it is taking Penfed to process your paperwork, I mailed my IRA forms to Penfed on 12/11 and Vanguard transferred the funds from my IRA account on 12/20. No sign yet of my new CDs in my Penfed account.
I mailed my forms in about Nov 26. They pulled funds from Vanguard on Dec 12 and issued my CDs on Dec 16 (backdated to Dec 12).

I suspect timing may be a bit slower than normal due to volume.
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Old 12-24-2013, 09:32 AM   #182
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I told my sister to take her money out of Ally savings and open up some PenFed CDs while the rates are still at 3%. When she called to open the account, she said the rep told her the rates were good through January 31. Has anyone else heard this date? I was thinking they were only extending the dates for sure until the end of the year.
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Old 12-24-2013, 11:51 AM   #183
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Just curious, a lot of folk here are talking about that if rates rise proportionally in the next 2 - 5 years they "may" decide to take the 12 month penalty hit prior to maturity, say after 2 years. Well, how does one claim that as a loss for tax purposes if you have already claimed the say 2 years of income and paid taxes on it? Assume retired and filing a normal tax form as opposed to itemized.
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Old 12-24-2013, 11:58 AM   #184
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There is no loss here. You simply didn't earn money that you were hoping to earn. Just like when stocks used to pay dividends but then stopped. There is no taxable income, but no loss either. Just less money for both you and the government.
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Old 12-24-2013, 12:50 PM   #185
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There is no loss here. You simply didn't earn money that you were hoping to earn. Just like when stocks used to pay dividends but then stopped. There is no taxable income, but no loss either. Just less money for both you and the government.
BUT if you have already claimed the income for year 1 and you cancel and pay in year 2 you DO have a loss of what you paid in tax for year 1.
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Old 12-24-2013, 12:53 PM   #186
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BUT if you have already claimed the income for year 1 and you cancel and pay in year 2 you DO have a loss of what you paid in tax for year 1.
That's not a loss, it's a forfeiture. Nothing to do with your taxes.
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Old 12-24-2013, 12:57 PM   #187
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That's not a loss, it's a forfeiture. Nothing to do with your taxes.
Let us just say the income was $15k for year 1 assume 30% tax bracket for this, so you pay $5k for year 1. Year 2 you take a penalty and pay back $15k for year 1. You are out $5k paid in tax. SO. It is better to cancel at the beginning of the year prior to paying the tax. (I suppose)
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Old 12-24-2013, 01:01 PM   #188
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Let us just say the income was $15k for year 1 assume 30% tax bracket for this, so you pay $5k for year 1. Year 2 you take a penalty and pay back $15k for year 1. You are out $5k paid in tax. SO. It is better to cancel at the beginning of the year prior to paying the tax. (I suppose)
The penalty is reported to you on form 1099-INT and you enter the amount on Line 30 of your 1040 as an Adjustment to Gross Income. So, if you were in the same 30% bracket in year 2, you'd get a tax reduction equal to the $5k you paid the prior year.
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Old 12-24-2013, 01:01 PM   #189
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Early withdrawal penalties are a reduction of gross income reported on line 30 of Form 1040 (like an deductible IRA contribution of HSA contribution) so they reduce income for the year.
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Old 12-24-2013, 01:05 PM   #190
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Just curious, a lot of folk here are talking about that if rates rise proportionally in the next 2 - 5 years they "may" decide to take the 12 month penalty hit prior to maturity, say after 2 years. Well, how does one claim that as a loss for tax purposes if you have already claimed the say 2 years of income and paid taxes on it? Assume retired and filing a normal tax form as opposed to itemized.

The penalty is not a "loss" per se. You CAN claim a tax deduction for the early withdrawal penalty. Here's a copy and paste from IRS Publication 550:

"Penalty on early withdrawal of savings. If you withdraw funds from a certificate of deposit or other deferred interest account before matur- ity, you may be charged a penalty. The Form 1099-INT or similar statement given to you by the financial institution will show the total amount of interest in box 1 and will show the penalty separately in box 2. You must include in income all interest shown in box 1. You can de- duct the penalty on Form 1040, line 30. Deduct the entire penalty even if it is more than your interest income"
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Old 12-24-2013, 01:09 PM   #191
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The penalty is reported to you on form 1099-INT and you enter the amount on Line 30 of your 1040 as an Adjustment to Gross Income. So, if you were in the same 30% bracket in year 2, you'd get a tax reduction equal to the $5k you paid the prior year.
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Early withdrawal penalties are a reduction of gross income reported on line 30 of Form 1040 (like an deductible IRA contribution of HSA contribution) so they reduce income for the year.
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The penalty is not a "loss" per se. You CAN claim a tax deduction for the early withdrawal penalty. Here's a copy and paste from IRS Publication 550:

"Penalty on early withdrawal of savings. If you withdraw funds from a certificate of deposit or other deferred interest account before matur- ity, you may be charged a penalty. The Form 1099-INT or similar statement given to you by the financial institution will show the total amount of interest in box 1 and will show the penalty separately in box 2. You must include in income all interest shown in box 1. You can de- duct the penalty on Form 1040, line 30. Deduct the entire penalty even if it is more than your interest income"
I guess that sums it up nicely...
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Old 12-24-2013, 02:09 PM   #192
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According to bankrate.com, the next highest yielding 5 year CD is with "Virtual Bank", at 2%. The PenFed rate is 50% higher than the next highest rate. I find this highly unusual, and something tells me it may go away soon. Perhaps they are trying to attract money to the bank, but I suspect it will come in very quickly, and once they reach the amount they were looking for, I expect they will withdraw the offer. I still think it may be a while before we see 3%+ rates widely available again from banks or credit unions.

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Called Penfed today to see how long this offer might last. They said it should be good to the end of the month....of course they could change at any time.
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I told my sister to take her money out of Ally savings and open up some PenFed CDs while the rates are still at 3%. When she called to open the account, she said the rep told her the rates were good through January 31. Has anyone else heard this date? I was thinking they were only extending the dates for sure until the end of the year.
I did recall that someone posted the Jan 31 date......turns out it was you, Ready. As I posted earlier, I was told the rate was good until the end of December. I asked specifically if my certificate which expires in Jan would be eligible for the 3.04 rate and I was told it would receive whatever rate was in effect at that time and the rates are usually set on the 1st of the month.

I think most of us believe the rate could change at any time (e.g. before the end of December) no matter what they say....and I have not seen a written expiration date. They sent me a letter which only states rates are "subject to change".
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Old 12-24-2013, 03:56 PM   #193
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I think most of us believe the rate could change at any time (e.g. before the end of December) no matter what they say....and I have not seen a written expiration date. They sent me a letter which only states rates are "subject to change".
It seems to me that there is more interest (ok maybe just more posts) in this Penfed deal then there was in the 5% 10 year CD back in 2011. So I'd expect to see it disappear sooner rather than latter.

Of course I am also expecting the administration to declare that Dec has 99 days to help out ACA enrollment.
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Old 12-24-2013, 05:48 PM   #194
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It seems to me that there is more interest (ok maybe just more posts) in this Penfed deal then there was in the 5% 10 year CD back in 2011. So I'd expect to see it disappear sooner rather than latter.

Of course I am also expecting the administration to declare that Dec has 99 days to help out ACA enrollment.
Yes, because Penfed is advertising this rate on Bankrate.com and it shows up in Bankrate's CD search tool....something I never noticed before. My experience with Penfed would suggest their systems could easily get swamped by the surge.
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Old 12-24-2013, 05:54 PM   #195
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12 months from now 3% could be a low rate for 5 year money. Who knows. Navy credit union dwarfs all other credit unions by deposits. If the Feds fire gets out of control rates move up & offer some unusual opportunities.
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Old 12-24-2013, 09:23 PM   #196
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Yes, because Penfed is advertising this rate on Bankrate.com and it shows up in Bankrate's CD search tool....something I never noticed before. My experience with Penfed would suggest their systems could easily get swamped by the surge.
I suspect that they are advertising because it isn't easy to get people to lock in 5 year money. Look at the retail money flowing out of bond funds, the huge discounts on fixed income closed end funds, etc. Getting people to out on the yield curve is tough.

They could get swamped, but people don't seem to be as desperate as they once were. A couple years ago a financial institution that was not traditionally in banking offered an above market rate on a savings account in its banking subsidiary that was well above the usual suspects (Ally, Discover, Sallie Mae, etc.). The bank's assets doubled in a quarter. I bet pen fed is attracting a good bit of deposits with this deal, but nothing like that.
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Old 12-25-2013, 06:46 AM   #197
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Opened mine yesterday. A Big one too. Easy transfer from other institution, Good Customer Service, Faxed a confirmation and BNFs. All done.

Now let us hope we do not have to mess with it for a few years.
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Old 12-26-2013, 01:24 PM   #198
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Added a 5yr CD to my Penfed IRA today. I had Fidelity initiate a direct rollover from my 401k. The check was payable to Penfed FBO "my name" was mailed to me. I only saw the form/instructions for new accounts on Penfed's website, but I am lucky to be close to a Penfed branch office. No lines, no waiting....10 minutes. I asked the member services rep about the rate and he said "we won't know for sure what the rates will be in January until the beginning of the month". The deposit is now showing in my IRA share account and should be moved into the CD soon.
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Old 12-26-2013, 10:28 PM   #199
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Somebody must be buying those 3% 10 year Treasury Bonds.
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Old 12-27-2013, 10:06 AM   #200
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Somebody must be buying those 3% 10 year Treasury Bonds.
Yeah, the Fed.
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