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what to do with cd
Old 01-04-2016, 09:20 AM   #1
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what to do with cd

I have 250k in a savings account drawing 1% and a local credit union is offering a 60 month cd at 2.47 with a 180 day penalty for early withdrawal. Should I go for the cd and pay the penalty if rates go up or sit on the 1%? what are your thoughts? thanks

frank
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Old 01-04-2016, 10:05 AM   #2
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Interest rates will almost surely go up during the next 60 months. How does the rate on the 60 month CD compare with CDs of 1, 2 or 3 years? If the difference is not that much, you could go with the shorter duration.
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Old 01-04-2016, 11:45 AM   #3
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a local credit union is offering a 60 month cd at 2.47 with a 180 day penalty for early withdrawal. Should I go for the cd and pay the penalty if rates go up or sit on the 1%?
Here's an Early Withdrawal Penalty Calculator that can help you make that decision:

https://www.depositaccounts.com/tool...alculator.aspx

It looks like your break even point is 10 months.
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Old 01-04-2016, 01:35 PM   #4
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I would probably hedge a little and put some in that CD, and split the rest between one and two year CD's and the 1 percent savings account. Synchrony is offering 1.30 percent for a 14 month CD for existing customers and a 1.45 percent CD for two years for everyone. The promo code for the 14 month CD is CCD14. E-Loan is offering 1.52 percent for the 2 year CD per depositaccounts.com.
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Old 01-04-2016, 03:40 PM   #5
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Is that taxable? If so, I would suggest a ladder of muni bonds up to 60 months, say $50K each spread a year apart. As a year matures, you can roll it over at the then current (hopefully higher) rate.
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Old 01-04-2016, 04:49 PM   #6
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It is very hard, if not possible, to predict if rates are going to be higher in 60 months because it depends on economy, monetary policies, trade deficit, debt, involvement in conflicts,trade / currency wars etc. If the money are set for CDs (FDIC insured) then I would go $100K 60 month now, then within next 12 month depending on rates and your AA goals make a decision for another CD.
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Old 01-04-2016, 06:29 PM   #7
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I would probably hedge a little and put some in that CD, and split the rest between one and two year CD's and the 1 percent savings account. Synchrony is offering 1.30 percent for a 14 month CD for existing customers and a 1.45 percent CD for two years for everyone. The promo code for the 14 month CD is CCD14. E-Loan is offering 1.52 percent for the 2 year CD per depositaccounts.com.
Thanks for that.
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