Cash in a brokered cd?

[pletal]

I have a brokered cd paying 3.3% and it comes due 4/2/2024. I paid $ 320k for 10 year term. Interest goes into a sweep account. It is showing a value of $350k right now. Would it be wide to sell it now and put it into a 5 year Mutual of Ohama fixed annuity I just opened paying 2.6% for the next 5 years? It looks like I can be up about 30k (i know taxes) but that's about what I would have made over the term


Thanks for any advice on this, Happy 4th !

 

[pb4uski]

Your $320k at 3.3% will be worth $364k in 4 years.... $320k*(1+3.3%)^4

Meanwhile, $350k would result in $30k capital gain and $4.5k capital gains tax at 15%.... so $345.5k in the MYGA... at 2.6% in 4 years would be worth $383k.

One problem might be that your MOA annuity will likely exceed the state guaranty fund limit in the event MOA expereinces financial difficulties.

All if that said, 3.3% is a nice rate.

 

[Dtail]

Do you have any major tax issues with receiving the income all in one year from the MYGA vs. each year from a CD?
ACA income management, etc?

 

[pb4uski]

If so, you could use the 10% free withdrawal provision to withdraw the interest so you don't get slammed when withdrawn later.

 

[pletal]

Do you have any major tax issues with receiving the income all in one year from the MYGA vs. each year from a CD?
ACA income management, etc?

No , it doesn't really matter. I am usually in the highest tax bracket either way

 

[pletal]

Your $320k at 3.3% will be worth $364k in 4 years.... $320k*(1+3.3%)^4

Meanwhile, $350k would result in $30k capital gain and $4.5k capital gains tax at 15%.... so $345.5k in the MYGA... at 2.6% in 4 years would be worth $383k.

One problem might be that your MOA annuity will likely exceed the state guaranty fund limit in the event MOA expereinces financial difficulties.

All if that said, 3.3% is a nice rate.

I guess I will have to find out about the state fund item, Not sure on that.

 

[Dtail]

I guess I will have to find out about the state fund item, Not sure on that.

I believe FLA is 250k.

 

[njhowie]

The "value" shown of $350k is not an indication of what you could expect to sell it at. The only way you will know is if you request a bid and see what comes back. It would likely be less than you are expecting.

In any case, when I do this with my bonds, I request the bid, then use a price/yield calculator to determine what that price equates to as yield to maturity. If that YTM is competitive with what the current market yields are, then I consider selling. As previously mentioned, you're likely to find that the bid will represent a YTM above what the current market yield is and so it will likely not be to your advantage to sell.

I periodically test the waters with a 4.125% CD I have maturing September 2024. The bids always come back ridiculously low, while the "value" shown for it is about 15% above face value. I have no problem holding until maturity if they want to play games with their bids.

 

[pletal]

The "value" shown of $350k is not an indication of what you could expect to sell it at. The only way you will know is if you request a bid and see what comes back. It would likely be less than you are expecting.

In any case, when I do this with my bonds, I request the bid, then use a price/yield calculator to determine what that price equates to as yield to maturity. If that YTM is competitive with what the current market yields are, then I consider selling. As previously mentioned, you're likely to find that the bid will represent a YTM above what the current market yield is and so it will likely not be to your advantage to sell.

I periodically test the waters with a 4.125% CD I have maturing September 2024. The bids always come back ridiculously low, while the "value" shown for it is about 15% above face value. I have no problem holding until maturity if they want to play games with their bids.

Update on this. I did sell one. I paid 50k, sold for a little over 55k (long term cap gains tax) took that money and put it in a 2.75 fixed annuity for 7 years. Looks like doing the math I up about $1600 for the term left on the CD by doing this. They do play games with their bids