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Recommendation on CDs
Old 07-01-2016, 12:26 PM   #1
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Recommendation on CDs

Hi all,
Was wondering if anyone had any recommendations on CDs, say for
a 1 or 2 year term.

Have some cash sitting in a Fidelity money market in my IRA, and I hate that it's not earning anything. I don't need the funds for at least 1 or 2 years.

I've never purchased a CD through an IRA account...but have bought them at banks before. Is purchasing through Fidelity just as safe as buying 'em through a bank. Are they insured if the bank fails ? And once it reaches the maturity date, do they simply credit the interest and principal back to the money market account.

Any other thoughts on an equally safe, fixed investment ?

Thanks for any advice.
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Old 07-01-2016, 12:32 PM   #2
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If you have money outside your IRA what I do is put my liquidity there and keep my IRA fully invested. For my liquidity I use an online savings account that earns 0.95%, is FDIC insured and available at anytime without penalty.
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Old 07-01-2016, 12:45 PM   #3
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As far as I know, all CD's through Fidelity are FDIC insured.
This link should give you the info you need.

https://www.fidelity.com/fixed-income-bonds/cds

In case that link doesn't work for you, just type in certificate of deposit in the search box. I've never opened a CD @ Fidelity, so I can't answer your other questions.

Or consider giving them a call. I've always been impressed with their customer support.
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Old 07-01-2016, 12:50 PM   #4
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Only recommendation I have is to consider longer term CDs with minimal early withdrawal penalty. I think there are some examples over at depositaccounts.com. I think Fido offers brokered CDs so make sure that would meet your needs.
As for maturity options my credit union IRA CDs offer a variety of choices at maturity.


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Old 07-01-2016, 12:57 PM   #5
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I've got a CD with Discover Bank - it's all online and they have a good rate (though not usually the absolute best). I invested directly with them and it's insured up to the limits. I can elect what I want to do with the interest, although I've just elected to have it credited to the account.
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Old 07-01-2016, 02:08 PM   #6
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ATTN Russman: I just opened a CD @Fidelity.
EVERBANK 0.500000% 07/14/16 - 10/13/16 (3 months) Minimum $1,000.00
*I understand you mentioned a 1 or 2 year CD's*

You'll have to go to Fidelity and check the 1 & 2 year rates yourself, but as of today, you'd be better off going with the short-term.
*Unless you think rates are going lower*

Regards
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Old 07-01-2016, 03:20 PM   #7
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Only recommendation I have is to consider longer term CDs with minimal early withdrawal penalty................
My experience with Schwab brokered CDs is that there is no such thing as
EWP like when you own the CDs directly. The only way to get rid of them early is to find a buyer........so the equivalent to the EWP is the spread between what you want and what the buyer is willing to pay........I have no direct experience but have read that the "haircuts" can be substantial.
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Old 07-01-2016, 03:28 PM   #8
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I have purchased CDs through Fidelity. They are safe and FDIC insured with the exception noted below. You can purchase 'new issue' CDs or 'Secondary Market' CDs. The CDs do not renew so you don't have to worry about getting stuck for another term. The CD will have a 'coupon frequency'. This is how often interest is deposited into your cash account. At the end of the term the principal and last interest payment is deposited into the cash account. Very short term CDs may make the entire interest payment at maturity.

New Issue CDs - These are issued by banks, Fidelity is just a go-between. They are purchased in $1000 increments so you may have a small amount left over that cannot be invested. Right now, Fidelity has a 2yr new issue CD at 0.95% with a semi-annual coupon frequency.

Secondary Market CDs - These are previously issued CDs that are available for purchase. The purchase price is expressed as a percentage of face value and fluctuates as interest rates change. A CD priced at 100 (or 100% of the $1000 face value) is said to be "priced at par". If the purchase price is above par (above 100 price/above $1000 value), the excess is NOT FDIC insured and NOT RETURNED to you at maturity. When researching these, you are interested in the 'ask price' and 'ask yield to worst'. 'Ask' is the data for those interested in purchases. There is also 'Bid" data but that is for the sellers. Fidelity secondary market currently has an AMEX 1.75% coupon CD maturing on 7/11/2018 with an ask price of 100.914 and a 1.28% yield to worst. This means for each one you purchase, you will receive $17.50 in interest each year but you're paying over $1,009 for that CD and will only get back the $1,000 face value at maturity so the effective yield is only 1.28%. The $9 excess is not FDIC insured.

Secondary market CDs will have a quantity expressed as 20(5), for example. This means 20 CDs ($20,000) are available at the price/yield but you must purchase a minimum of 5 CDs. If you have a lot to invest, you may have to make multiple purchases.

If you need to redeem either type of CD early, you sell at the bid price which can be substantially lower and acts as an early withdrawal penalty.

For taxable accounts, if you purchase a secondary market CD you will probably do so in between interest payment periods. This results in 'accrued interest' that appears on your brokerage tax form and is easily entered into the tax filing software.
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Old 07-01-2016, 04:14 PM   #9
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Originally Posted by jazz4cash View Post
Only recommendation I have is to consider longer term CDs with minimal early withdrawal penalty. I think there are some examples over at depositaccounts.com. I think Fido offers brokered CDs so make sure that would meet your needs.
As for maturity options my credit union IRA CDs offer a variety of choices at maturity.


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Recently, I had been buying short term, 1 and 2 year CDs until I learned that with some banks, a 5 year CD with the penalty pays the same/about the same at the shorter term CD. I wish I had followed that strategy over the last few years. I left a few percent on the table since rates have remained low.
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Old 07-01-2016, 07:39 PM   #10
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Navy Federal Credit Union has a Special Easy Start 12 month CD that pays 3%.

https://www.navyfederal.org/products...ates-rates.php
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Old 07-01-2016, 11:17 PM   #11
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Navy Federal Credit Union has a Special Easy Start 12 month CD that pays 3%.

https://www.navyfederal.org/products...ates-rates.php
Max balance limit might be a problem:

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
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Old 07-01-2016, 11:29 PM   #12
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Andrew Federal Credit Union has an 84 month (I think) 3% CD for IRAs only. I think the EWP on mine is 180 days. I opened the basic account in MD in person (easy to qualify just pay $5.00 to a consumer membership group). It was a bit cumbersome as all of the paperwork to set up the IRA and the transfer from Vanguard had to be done via snail mail, but worth it to me.

Check depositaccounts.com to get best rates. For shorter term CDs, you might be better off with online savings - like Ally - paying around 1%



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Old 07-01-2016, 11:40 PM   #13
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But the reviews are horrible.
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Old 07-01-2016, 11:55 PM   #14
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Yes, well I wouldn't use them for daily banking or a lot of transferring, but for a long term 3% CD I thought it was worth it. Set it up and forget it.



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Old 07-02-2016, 07:30 AM   #15
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Synchrony Bank has a 2 year CD paying 1.45%. It is an online bank that is FDIC insured. I have had CDs there for about 3 years. It was the prior GE Capital Bank which was spun off. There is no balance limitation.
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Old 07-02-2016, 10:07 AM   #16
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All CD accounts have early withdrawal penalties so if you need a short term with possibilities of early withdrowal, I think MM is a better choice. Current top MM: Dime: 1.1%, Barklays: 1%, Capital One: 1%.
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Old 07-02-2016, 10:38 AM   #17
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I agree with a few others here that an online account pulling ~1% is a decent compromise solution for short-term money. In trying to get a better return it seems like you're up against CD specials that either limit you to a few thousand $ or have some other restrictions that make them less attractive once you look under the hood. I've looked into putting some short-term money into CDs with my local credit union but - while the rates are acceptable - their 2 yr EWP is not. If you can find the trifecta of decent interest rate combined with reasonable caps and low EWPs, bingo. But they are rare and - having missed the renowned end-of-year Penfed 3% deal of 2 or 3 years ago - I've been kicking myself ever since. Such opportunities are rare and one needs to be ready to pounce.
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Old 07-03-2016, 11:19 AM   #18
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I have a couple big 5 year cd's maturing soon, and the renewal rate is going to be (only) 1.83%. I'm wondering if it's worth it to me to move it out of my current credit union into somewhere else for an additional half percent or so. Another bucket to keep track of. Decisions, decisions. I did get in on the 3% PenFed frenzy a few years ago, which was great.
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Old 07-04-2016, 12:11 AM   #19
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Originally Posted by UpAnchor View Post
I agree with a few others here that an online account pulling ~1% is a decent compromise solution for short-term money. In trying to get a better return it seems like you're up against CD specials that either limit you to a few thousand $ or have some other restrictions that make them less attractive once you look under the hood. I've looked into putting some short-term money into CDs with my local credit union but - while the rates are acceptable - their 2 yr EWP is not. If you can find the trifecta of decent interest rate combined with reasonable caps and low EWPs, bingo. But they are rare and - having missed the renowned end-of-year Penfed 3% deal of 2 or 3 years ago - I've been kicking myself ever since. Such opportunities are rare and one needs to be ready to pounce.
I'll have to agree with all you've said, as I've moved most of my extra savings from my credit union to CIT @ almost 1%, and I was very lucky indeed to have joined this forum in time to see the PenFed offer and jump on it.

No real CD insight to the OP, but the CIT or other online 1% savings are a good option at least intermediately.
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