Need some CD knowledge

[mattbaxx]

I am getting unexpectedly involved with my father and his wife's finances (by their request I should add).

They are 91 and 87.

They've got $45K in checking/savings. With their bit of income that will not likely be depleted this year, but certainly next.

They've got $132K in CDs that mature 12/28/2022.

They've moved to assisted living and have an empty house, paid off, $500K. Their son has responsibility for the house. I can only provide counsel. If he sells the house this year all is well.

If he doesn't, what do I need to ask the bank about the CDs? Early withdrawal fees? Turning off auto-renew for next December? I don't want to get locked into another year accidentally.

I have no experience with CDs so just want to know what I'm missing.

 

[CincyDave]

Typically CDs so have some type of early withdrawal penalty, maybe a few months interest. You'd have to check the terms. Some institutions offer no penalty CDs which you might want to check into. You can use Bank Rate to check around https://www.bankrate.com/banking/cds/cd-rates/

 

[Dabbler]

Banks generally have some sort of grace period, typically ranging from one to two weeks, during which time you can close an auto-renewed CD without penalty. You can usually also inform them of your intention in advance (on a form they provide -- often at opening -- or later,in a letter of instruction).



A bank may also send a reminder notice that a CD is maturing, a month or so prior to the maturity date, and can ask for instructions then. But with a move to assisted living (change of address) and possible house sale, you'll need to have mail forwarding in place by December. And/or directly provide the bank with a change of address.



And, yes, in case the funds in the CD (some, or all) are needed prior to maturity, you'll need to find out the bank's "EWP" (early withdrawal penalty) -- which can vary both among banks their certificate "products."



However, before ANY of the above may be inquired, be sure to first have in place a POA (Power of Attorney) . . . or else the bank will likely not answer any of your questions, or even register a change of address.

 

[DayDreaming]

A CD early withdrawal penalty just means that you won't get all of the interest that was accrued since last renewal. You won't loose any of the principal. Considering how low most CD interest rates are now, it might not be anything to worry about - the interest accrued might not be very much.

But yes, I would look into turning off automatic renewal, since it sounds like that money will be needed after their checking/savings is empty next year.

 

[Masquernom]

I've found many smaller banks will not turn off auto-renewal. I've had to wait until the CD actually matured, and call and ask them to transfer the CD to a checking/savings account. You typically have several days after they mature to make the transfer.
The banks tell me their computer systems are not programmed to allow them to set the CD's to not auto renew.
They do typically send a notice of maturity before the actual maturity date.

 

[pb4uski]

It sounds like the $132k that is currently in CDs will be needed in the near future (2023 or 2024). I would open an online savings account and put both the $45k of savings and the $132k of CD proceeds in that.

There are no early withdrawal penalties on online savings account so more liquidity and flexibility, and often the yields are competitive with CDs. Currently, online savings accounts pay 0.5-1.0% and 1-2 year CDs are 1-2%, but after a 6-month early withdrawal penalty would only be 0.5%-1.0%.

Also, most banks allow partial withdrawals from CDs, so if you have $132k in a 1-year CD at 0.5% and a six-month early withdrawal penalty need to withdraw $20k then the penalty is only $50 (1/2 year on interest but only on the amount withdrawn). But ask to be sure if your banks does if you decide to stick with CDs.

 

[OldShooter]

When my mother had a cash shortfall of a few months, I simply loaned her the money. You might want to consider that instead of looking at early withdrawal penalties.

 

[silvor]

I am getting unexpectedly involved with my father and his wife's finances (by their request I should add).

They are 91 and 87.

They've got $45K in checking/savings. With their bit of income that will not likely be depleted this year, but certainly next.

They've got $132K in CDs that mature 12/28/2022.

They've moved to assisted living and have an empty house, paid off, $500K. Their son has responsibility for the house. I can only provide counsel. If he sells the house this year all is well.

If he doesn't, what do I need to ask the bank about the CDs? Early withdrawal fees? Turning off auto-renew for next December? I don't want to get locked into another year accidentally.

I have no experience with CDs so just want to know what I'm missing.

Why wouldn’t he sell the house if they need the money?

 

[mattbaxx]

Why wouldn’t he sell the house if they need the money?

Indeed. Why wouldn't he. Inability to act. Denial of his parents' situation. Some of his own personal/family problems. I hope to convince him to do so this spring/summer, but I need a backup plan in case he doesn't. I don't actually want involvement in the home selling, because in theory I shouldn't even be as involved as I am in their bill paying. This is my father and his second wife, people who had no hand in my raising, though sadly their son is incapable of stewarding them fully in their final years.

Fortunately for my dad, his first wife raised me right.

 

[mattbaxx]

When my mother had a cash shortfall of a few months, I simply loaned her the money. You might want to consider that instead of looking at early withdrawal penalties.

Good point. For my own mother I have done exactly that in the past. For my father and his second wife I choose not to get that entwined. Hoping attention to detail (and browbeating half brother to sell house) will get us through the end of the year without early withdrawals.

 

[mattbaxx]

Thanks for all the CD insight, withdrawal considerations, auto renewal info. A visit to the bank this week should help me get all my ducks in a row.