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Where do you put your CD's?
Old 02-14-2009, 09:27 AM   #1
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Where do you put your CD's?

We have been growing our CD ladder for oh, say, about 10 years. Started out with our own credit union, then joined in on here and found out about the great rates at PenFed and opened a few there. Last year one was about to roll over to a crappy rate, but due to a great suggestion from someone here, found a great rate at Capital One.

We have about 80K in CD's currently. We don't plan to add more money, just roll them into whatever is the best CD available when they mature. Someone recently mentioned to me that I should consider the fact that these CD's are all in taxable accounts.

OK, that makes sense on one level. However, (1) we like to keep access to these monies, in case of some huge emergency (we can't access IRA's yet) (2) how would you go about getting the best rate on a CD within an IRA? i.e. say I haven't done my Roth IRA yet for the year, and Capital One has a great CD rate. If I wanted to put that CD into a Roth IRA, would I have to open it with Capital One, or could I open it with Vanguard, and purchase it that way Is it even worth it
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Old 02-14-2009, 09:36 AM   #2
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Interesting question - I'm not aware you can have CD's in a tax advantaged account. I keep our CD's (~$50K) in a taxable account.

One of the reasons I started buying I-Bonds 6 years back was the tax-deferred advantage of interest bearing savings outside of IRA's and 401(k)'s
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Old 02-14-2009, 11:08 AM   #3
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Interesting question - I'm not aware you can have CD's in a tax advantaged account. I keep our CD's (~$50K) in a taxable account.
Yes you can have CD's in a tax advantaged account if that account is at a broker and the broker offers a CD market. The downside to buying your CD's through a broker is that you don't often get the best rate available because it is what they have in inventory, and the CD's don't automatically renew.

To hold CDs in a tax-advantaged account and shop the market would mean one would have to set up individual Roth accounts at each bank where the best rate existed at the time, then, when rolling over, you'd have to do a custodian transfer to get the next best rate. Doesn't seem worth the effort.

I have put extra money into CD's in my Roth, when it was mid-year and wasn't ready to reallocate.

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Old 02-14-2009, 11:18 AM   #4
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We have a "reserve" bucket of CDs in our Vanguard IRA via the brokerage account mentioned. If Flagship status you can also use this brokerage account to buy treasuries (including TIPS) at auction for no fee.
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Old 02-14-2009, 11:54 AM   #5
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We have been growing our CD ladder for oh, say, about 10 years. Started out with our own credit union, then joined in on here and found out about the great rates at PenFed and opened a few there. Last year one was about to roll over to a crappy rate, but due to a great suggestion from someone here, found a great rate at Capital One.

We have about 80K in CD's currently. We don't plan to add more money, just roll them into whatever is the best CD available when they mature. Someone recently mentioned to me that I should consider the fact that these CD's are all in taxable accounts.

OK, that makes sense on one level. However, (1) we like to keep access to these monies, in case of some huge emergency (we can't access IRA's yet) (2) how would you go about getting the best rate on a CD within an IRA? i.e. say I haven't done my Roth IRA yet for the year, and Capital One has a great CD rate. If I wanted to put that CD into a Roth IRA, would I have to open it with Capital One, or could I open it with Vanguard, and purchase it that way Is it even worth it
At the end of November 2008, I rolled my entire 401k plan (an income fund managed by Fidelity) into a IRA five year, 5.0% CD through Fidelity. The CD is with Capital One. Fidelity was very familiar with the situation and there was no fee involved in this transaction. The interest is paid out every 6 months. Except for the year 2009, I have to take the Minimum Required Distribution anyway. This could have been done in a Roth IRA also. I also had a big CD in a local bank that matured 2-11-09 and moved it to another bank the same day at 4 years, 4.5% which I couldn't touch anywhere. Bankrate.com and other web sites don't always publish the best rates.
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Old 02-14-2009, 01:02 PM   #6
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I have CDs in my emergency fund. I have a 3 month, 6 month, 1 year, 3 year and a 5 year. If I don't have an emergency I just keep rolling them over.

Also having my emergency fund in CDs, it takes away the temptation to claim anything as an emergency.
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Old 02-14-2009, 02:01 PM   #7
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I generally split my CD's between my car and the house. Oh and they are in a case.
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Old 02-14-2009, 03:07 PM   #8
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Interesting question - I'm not aware you can have CD's in a tax advantaged account. I keep our CD's (~$50K) in a taxable account.

One of the reasons I started buying I-Bonds 6 years back was the tax-deferred advantage of interest bearing savings outside of IRA's and 401(k)'s
Sure you can. Both of us (DW and I) have all of our Traditional IRA's in CD's at PFCU (6.25%) along with our ROTH IRA's in CD's (6.25%) there too. Just have to tell them where and what you want. They will even calculate your RMD's and take the RMD out of a CD, and leave the remainder of the CD there at the same previous rate. They even sent DW a letter a few weeks ago asking her what she wanted to do about 2009 RMD (take it or waive it). Told DW to decide and then go on line and tell them (she waived it).
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Old 02-14-2009, 03:24 PM   #9
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Sure you can. Both of us (DW and I) have all of our Traditional IRA's in CD's at PFCU (6.25%) along with our ROTH IRA's in CD's (6.25%) there too. Just have to tell them where and what you want. They will even calculate your RMD's and take the RMD out of a CD, and leave the remainder of the CD there at the same previous rate. They even sent DW a letter a few weeks ago asking her what she wanted to do about 2009 RMD (take it or waive it). Told DW to decide and then go on line and tell them (she waived it).
And I have an account and CD's with PFCU

Just never thought of it I suppose.

Thanks SG for starting this thread
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Old 02-14-2009, 04:08 PM   #10
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Wow, thanks everyone! This has been a very educational thread for me.

Don't feel bad Alan, I have an account with CD's at PenFed, too - taxable, of course
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Old 02-14-2009, 11:26 PM   #11
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OK, that makes sense on one level. However, (1) we like to keep access to these monies, in case of some huge emergency (we can't access IRA's yet) (2) how would you go about getting the best rate on a CD within an IRA? i.e. say I haven't done my Roth IRA yet for the year, and Capital One has a great CD rate. If I wanted to put that CD into a Roth IRA, would I have to open it with Capital One, or could I open it with Vanguard, and purchase it that way Is it even worth it
1) I just figure if it's a "huge emergency", it might be worth the penalty to break the CD. PenFed's early withdrawal penalty generally runs between 6 months to 1yr of interest. You would have to add-in 10% IRS early withdrawal penalty for IRA's unless your emergency qualifies for an exception. Also if you can put the money back within 60 days, it may qualify as a rollover. I'm looking at the college fund which I was too lazy to put in an education IRA and the taxes are painful.

2) My Credit unions (PenFed and NFCU) offer the same or slightly better rates for IRA-CD's than taxable CD's. The other trick I use is to break the total deposit into several CD's so I could break one or more small ones and avoid the early withdrawal penalty on the full amount. If you can ladder them in 6 month increments, that also helps.
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Old 02-15-2009, 05:26 AM   #12
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Back in 2005 we did a penalty free withdrawal of PFCU IRA CD Money. PFCU did not charge a penalty since we were over 59.5 years old. We used the money to bridge something or other and replaced it well within 60 days. No taxes, no penalty, kept the same CD rate too. Not sure if all, or even if PFCU, would do this now but it did work then.
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Old 02-15-2009, 05:16 PM   #13
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I generally split my CD's between my car and the house. Oh and they are in a case.
I keep all of mine in the house allocated equally between a wooden swivel case and six smaller plastic box cases. RE'd just six months and haven't found time yet to move them onto iTunes.

The financial ones are at IngDirect to be spent down ASAP. Funny, the last time one rolled over, the regular savings rate was higher than the CD rate.
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Old 02-15-2009, 08:07 PM   #14
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Gotadimple, I reread some of these letters and noticed that you mentioned that the IRA CD has to be at a brokerage. Not so! I just bought a regular CD at a local bank and they also offered IRA CD's.
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Old 02-16-2009, 04:07 PM   #15
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Gotadimple, I reread some of these letters and noticed that you mentioned that the IRA CD has to be at a brokerage. Not so! I just bought a regular CD at a local bank and they also offered IRA CD's.
Johnnie,
Thanks, but that's not what I meant to say. I did say one could open an IRA at any bank to take advantage of its CD rates. However, the disadvantage to that is that as you add IRA $ and you want to invest in other CDs, if bank #1 doesn't have attractive rates, one would then start to look for bank#2. The same would be true when the CD matured, if bank #2 had more attractive rates, then one might want to do a custodian transfer. Ultimately, this could become a cumbersome solution.

Over time, if you own several CDs, I could see several bank IRA accounts, which seems counterproductive. That's the advantage of holding your IRA account at a broker and being able to use their CD marketplace. And there are advantages and disadvantages to this as well.

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Old 02-17-2009, 06:23 AM   #16
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We used to keep IRA's CD's (4 different; DW ROTH and T-IRA and my ROTH and T-IRA) at 3 different Credit Unions. It was no problem at all, however; as we approached thinking RMD time we consolidated them all at PENFED, taking about a five year period to do so. We were lucky that the consolidated accounts all wound up at there as they even allowed us to merge many CD's (about 12 for each us) into 4 consolidated CD's (1 each ROTH and 1 each T-IRA) at the then current rate (6.25% as of 12/2006) which, increased the earnings a lot for the next 7 years (06-13). They have since revised that little nicety to only once in the life of a IRA CD (consolidate and step up in rate) which is currently not a reasonalbe factor but it still applies. Try that at most other institutions.
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Old 02-17-2009, 02:18 PM   #17
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I'd be putting mine with that Stanford guy--he has the highest rates in the country!!!!
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Old 02-17-2009, 03:31 PM   #18
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I setup Roth and standard IRAs with banks and Pen Fed.
Looking at history, rates of return are reasonable when no taxes and risk are involved.
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Old 02-17-2009, 03:57 PM   #19
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I'd be putting mine with that Stanford guy--he has the highest rates in the country!!!!
And not just on college tuition any more...
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Old 02-17-2009, 04:17 PM   #20
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Johnnie,
Thanks, but that's not what I meant to say. I did say one could open an IRA at any bank to take advantage of its CD rates. However, the disadvantage to that is that as you add IRA $ and you want to invest in other CDs, if bank #1 doesn't have attractive rates, one would then start to look for bank#2. The same would be true when the CD matured, if bank #2 had more attractive rates, then one might want to do a custodian transfer. Ultimately, this could become a cumbersome solution.

Over time, if you own several CDs, I could see several bank IRA accounts, which seems counterproductive. That's the advantage of holding your IRA account at a broker and being able to use their CD marketplace. And there are advantages and disadvantages to this as well.

-- Rita
Got 'cha. Could be cumbersome. Depending on your situation, you could stay busy moving assets.
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