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Old 12-06-2013, 12:04 PM   #81
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After reading this thread I decided to set up a ladder with PenFed CDs using funds in my Vanguard Short-Term Bond Index fund. I currently have no CDs with PenFed and the last time I had some, I bought them by filling out a form (on-line) and subsequently mailing a check to them. When I started the process a few days ago I saw that the only option available now is to transfer funds from another institution. Since I didn't have PenFed set up at Vanguard as one of my "banks" I had to go through that process. Hopefully now I can get the process restarted.
You have to specify "Checking" or Savings" when you give your account number. So it might not work from a brokerage account.

I have never done an ACH pull from a brokerage account. It really depends on how Vanguard handles these issues.

I used my bank account checking as an intermediary - transferred from my Fidelity Brokerage to my bank account, funds show up next morning at bank, then I opened the CD at PenFed to pull the funds from my bank checking account. Just a one day delay, basically.

Once all the dust has cleared, I will add the PenFed checking account as one of my banks for my Fidelity Brokerage - which usually takes a good 7 business days for them to establish. But I have to get all the proper paperwork back to PenFed first including adding the joint account owner, etc.

In the meantime it's nice to be able to fund the CDs quickly even though stuff is still traveling through the mail.
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Old 12-06-2013, 12:05 PM   #82
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Then again, they might have been referring to the warship Maricopa County.

USS Maricopa County (LST-938) - Wikipedia, the free encyclopedia
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Old 12-06-2013, 12:08 PM   #83
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Interesting to know there was a ship named after my county!

However, the Wiki article ended with this:
Captured by the North Vietnamese around the time of the fall of Saigon, on 29 April 1975, the ship was placed in service with the Vietnamese People's Navy and renamed Tran Khanh Du (HQ-501).
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Old 12-06-2013, 01:05 PM   #84
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Wow - thanks for this thread folks. I opened an account with PenFed and purchased 3 CDs (all 5 year). Took about 15 minutes over the phone from start to finish. Very pleasant experience.
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Old 12-06-2013, 05:16 PM   #85
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You have to specify "Checking" or Savings" when you give your account number. So it might not work from a brokerage account.

I have never done an ACH pull from a brokerage account. It really depends on how Vanguard handles these issues.

I used my bank account checking as an intermediary - transferred from my Fidelity Brokerage to my bank account, funds show up next morning at bank, then I opened the CD at PenFed to pull the funds from my bank checking account. Just a one day delay, basically.

Once all the dust has cleared, I will add the PenFed checking account as one of my banks for my Fidelity Brokerage - which usually takes a good 7 business days for them to establish. But I have to get all the proper paperwork back to PenFed first including adding the joint account owner, etc.

In the meantime it's nice to be able to fund the CDs quickly even though stuff is still traveling through the mail.
Well....it turned out to be harder than I thought and I still don't have my CDs.

Vanguard, as a non-bank financial institution, doesn't have an ABA routing number. Vanguard uses Mellon Bank of NY as an intermediary and you can only use that if you have a Vanguard Advantage account. I have one that has zero money in it. I think I had to establish it years ago to get a credit card that would let me do withdrawals at an ATM from my MM account.

In any event, they gave me the routing and account numbers for Mellon. Just to be sure, I called my Flagship rep and asked how Mellon would know exactly from which VG mutual fund account to transfer the money. Turns out that my Prime MMF is a "sweep account" so that's the one they will use (and that's the one I want them to use.)

I remember my elderly aunt (who was in her 80's at the time - I was then only in my late 40's/early 50's) used to say about some things, "I wonder how older people are able to deal with things like that (referring to renewing drivers licenses, medical insurance, etc.) I'm in my late 60's, feel like I'm reasonably with it but I found myself wondering how I would deal with a minor hassle like this in another 10 years if I'm lucky enough to both be around and still have money left to transfer.
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Old 12-06-2013, 08:37 PM   #86
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Thanks for sharing the info on the 3% 5-year CD from PenFed.

We've not banked with them before and don't know about PenFed's reputation, reliability, security, etc.

Has anyone had any problems with their accounts at PenFed? Specifically, regarding security, fraudulent access, etc?
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Old 12-06-2013, 09:01 PM   #87
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Well I just did my first ACH transfer! (yes, I closed out a BofA 1 year CD with .14 interest) and transferred to a 5 year CD! It was easy peasy and now I just have to watch for the paperwork in the mail, sign and send back in their postage paid envelope. Love it!
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Old 12-06-2013, 09:02 PM   #88
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Has anyone had any problems with their accounts at PenFed? Specifically, regarding security, fraudulent access, etc?
Other than the typical problems any financial institution offering credit cards experiences (fraudulent charges), no.
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Old 12-06-2013, 09:07 PM   #89
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Well I just did my first ACH transfer! (yes, I closed out a BofA 1 year CD with .14 interest) and transferred to a 5 year CD! It was easy peasy and now I just have to watch for the paperwork in the mail, sign and send back in their postage paid envelope. Love it!
A one year CD with 0.14 interest!?!

There are plenty of FDIC insured high-yield savings accounts that pay 0.8 to 0.9% interest and your money is not tied up for any fixed length of time.

Just FYI. You might want to look into it if you need a place to store shorter term money.
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Old 12-06-2013, 09:24 PM   #90
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Thanks for sharing the info on the 3% 5-year CD from PenFed. We've not banked with them before and don't know about PenFed's reputation, reliability, security, etc. Has anyone had any problems with their accounts at PenFed? Specifically, regarding security, fraudulent access, etc?
I've had accounts with PenFed for 30 years with no real problems. They once informed me of a potential problem with social security numbers being stolen and paid for credit monitoring for a year, but never had an actual issue.
PenFed doesn't deal with trust accounts which is why most of my money is kept at USAA, and their regular savings account rates are not competitive with online banks. This 3% rate is good enough to put some money into for now.
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Old 12-07-2013, 03:15 AM   #91
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PenFed doesn't deal with trust accounts which is why .........
Try again. Our CDs are registered/titled in our living trust. They might make you go joint and then retitle into the trust but eventually they did it in
one step.
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Old 12-08-2013, 08:53 AM   #92
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Last week I bought some 3 and 5 year PenFed CDs - the first CDs that I have ever owned.

One of the metrics that I look at across my domestic fixed income portfolio is duration. I'm not sure what to use for these CDs in looking at the weighted average duration of my domestic fixed income portfolio. While the value of the CD does not fluctuate with interest rates which would suggest zero, would the early withdrawal penalty affect duration? IOW, what is the duration of a 3 year or 5 year CD? Zero? or something other than zero?
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Old 12-08-2013, 09:25 AM   #93
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Last week I bought some 3 and 5 year PenFed CDs - the first CDs that I have ever owned.

One of the metrics that I look at across my domestic fixed income portfolio is duration. I'm not sure what to use for these CDs in looking at the weighted average duration of my domestic fixed income portfolio. While the value of the CD does not fluctuate with interest rates which would suggest zero, would the early withdrawal penalty affect duration? IOW, what is the duration of a 3 year or 5 year CD? Zero? or something other than zero?
I don't know how you could accurately model it compared to your bond funds.

I think it may be better to mark it as cash, which it is.

If you currently mark your cash allocation as having zero duration, it would make sense to do the same with this CD.

And the way these particular CDs from PenFed work, even with an early withdrawal penalty you never forfeit any of the original investment. So at worst case you would make 0% interest on them if held for 1 year or less (5yr CD).

More discussion here:
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Cash is a FI security with zero income and zero duration by definition. Bogleheads • View topic - Cash is a Zero-Duration Bond Fund [Discuss]
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Old 12-08-2013, 09:59 AM   #94
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Originally Posted by pb4uski View Post
Last week I bought some 3 and 5 year PenFed CDs - the first CDs that I have ever owned.

One of the metrics that I look at across my domestic fixed income portfolio is duration. I'm not sure what to use for these CDs in looking at the weighted average duration of my domestic fixed income portfolio. While the value of the CD does not fluctuate with interest rates which would suggest zero, would the early withdrawal penalty affect duration? IOW, what is the duration of a 3 year or 5 year CD? Zero? or something other than zero?
If you're really into analysis on that level, I would suggest you simply use an analysis similar to a bond fund. For a bond fund/bond, the duration is roughly the value change for a given change in interest rates. The only 'value change' your CD would undergo (apart from the scheduled interest credits) would be if you cashed it in, since it will otherwise be guaranteed to rise in value. So in that respect, you would look at what the interest penalty would be for a 3/5 year CD, and use that penalty rate as the duration....although that figure would have to be a modified duration, in the sense that you would (presumably) only cash it in if rates when up, so it would only have a negative duration, rather than a positive or negative duration like a bond fund or individual bond.

In a similar (but opposite) way, for I-bonds I would argue that the duration for I-bonds is only positive, because your I-bond will still increase with the guaranteed rates (similar how a CD is guaranteed to rise), while a rise in the yield curve (assuming it's from an accompanying rise in inflation) will cause the I-bond to rise in value more than what the current rate is because of the inflation component (giving it a positive duration, since the I-bond is truly increasing in value faster as rates go up). If you wanted to argue that I-bonds would decrease in value if we had deflation that exceeded the fixed rate component (and possibly have a negative duration), then perhaps you would have a valid argument, but I'll leave that up to those who want to dig that deep into it.

You can make an argument about the opportunity cost of leaving a CD or I-Bond invested at the lower rate as rates rise or fall and how that factors into "implicit duration", but IMO that's an exercise left to $100MM bond funds to argue over, where the impact is far greater, and isn't worth the metal exhaustion and computation for my size of stash.
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Old 12-08-2013, 10:39 AM   #95
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I see PenFed is offering 1.99% financing on auto loans. (I don't know if that is competitive or not - actually, it looks like it is quite competitive for my area).

So I could see taking the car financing instead of pulling my money out of a 5yr CD to pay for the car.
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Old 12-08-2013, 10:51 AM   #96
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I see PenFed is offering 1.99% financing on auto loans. (I don't know if that is competitive or not - actually, it looks like it is quite competitive for my area).

So I could see taking the car financing instead of pulling my money out of a 5yr CD to pay for the car.
By the same token I know that some ER members have PenFed 5/5 home loans. We have some PenFed CDs maturing in a year or so paying 4%; our PenFed 5/5 home loans are at 3%. Bought the new Penfed 3% CDs rather than paying off the home loans because it gives us free cash in fist for the duration of our 3% home loans.
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Old 12-08-2013, 11:19 AM   #97
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By the same token I know that some ER members have PenFed 5/5 home loans. We have some PenFed CDs maturing in a year or so paying 4%; our PenFed 5/5 home loans are at 3%. Bought the new Penfed 3% CDs rather than paying off the home loans because it gives us free cash in fist for the duration of our 3% home loans.
Very nice!
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Old 12-08-2013, 11:58 AM   #98
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Last week I bought some 3 and 5 year PenFed CDs - the first CDs that I have ever owned.

One of the metrics that I look at across my domestic fixed income portfolio is duration. I'm not sure what to use for these CDs in looking at the weighted average duration of my domestic fixed income portfolio. While the value of the CD does not fluctuate with interest rates which would suggest zero, would the early withdrawal penalty affect duration? IOW, what is the duration of a 3 year or 5 year CD? Zero? or something other than zero?
If you want to get really technical about it, you bought a 5 year fixed rate bullet that came with a put option that allows you to put the bond at par to the issuer for par minus a year of interest.

I don't get that worried about it. I lump CDs into fixed income with the comforting knowledge that they have approximately zero duration.
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Old 12-08-2013, 01:38 PM   #99
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Remember that PenFed is a Credit Union...
Does this mean one has to be a member to take advantage of the 3% rates?
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Old 12-08-2013, 01:53 PM   #100
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Does this mean one has to be a member to take advantage of the 3% rates?
Yes, but a $15.00 donation to their favorite charity makes you an instant member.
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