What to do with some extra money...

[gwraigty]

You don’t need to split into three different brokerages accounts for this! CDs purchased through a brokerage are offered by many FDIC institutions, and you just need to spread your CDs among multiple offering banks such that holdings don’t exceed $500K at any one bank.

A jointly owned CD is FDIC insured up to $500K as are joint holdings at any bank.

^^^

This! Brokerages have CDs available for purchase from multiple banks all the time.

 

[tulak]

CindyBlue, do you have any accounts at Fidelity?

They could be a good option and they have offices you can visit in person if you have questions, even though I don’t know if that’s true in your location (they tend to be in more populated areas).

Online is safe. I’ve used a high yield savings account from Synchrony with no problems and I’m sure Ally is the same.

A local credit union is also a great idea. If you’re not comfortable with online, then I’d recommend opening up Google Maps and searching for local banks and credit unions. Then visit their websites to see what they offer. And if you have any questions, feel
free to ask here. There’s tons of people that are more than happy to help.

At 500k with today’s rates, you should be yielding at least 10k a year (conservative) and probably closer to ~12.5k year.

 

[njhowie]

Consider moving it all to Fidelity, or other brokerage.

Every day Fidelity usually has between 100 and 200 new issue CDs available from 20 some different banks. You could easily spread the funds across CDs from different banks to stay under FDIC limits at each.

Additionally/alternatively, with a cash management account, Fidelity will automatically sweep it across a bunch of banks that participate in their FDIC-Insured Deposit Sweep Program. This sweeps the cash across a number of participating banks to ensure that the balance at any one of the banks does not go any higher than 98% of the FDIC limit. I don't remember what the rates are with this option.

https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBankList?type=fcma

Another alternative you might consider - treasury securities through treasurydirect.gov. The treasury securities are free from state taxes, and you don't have limitations of FDIC - it's all with the US government.

https://treasurydirect.gov/indiv/research/faq/faq.htm

Treasury securities are also available through Fidelity.

Another option is to search out brokerages that offer cold hard cash for your money. For example, Ally is currently offering $1200 for your $500k deposit:
https://www.ally.com/go/invest/promotion.html?CP=235505844;109650386

When the money is in the Ally Invest account, like other brokerages, you could then purchase brokered CDs and treasuries within the account.

Regardless of where you choose to move the funds, you should not be paying fees to do this kind of stuff.

 

[CindyBlue]

Just to expand on the term laddering since CDs are new to the OP:
The idea is you buy (for example) 4 CDs: a 3month, 6month, 9month, and a 12month. This is described as a 1 year ladder with 4 rungs. That way every 3 months you have 1/4 of your stash coming available should you need it. 3 months later when the shortest CD comes due if you don't need it you buy another 12 month. Same decision every 3 months.

You end up starting out with a lower over all combined % rate because the shorter CDs pay lower rates... but every 3 months you're rolling into the higher 1yr rate. In 9 months all CDs are earning 1 year rates, but you still got money coming available without penalty every 3 months.

Right now interest rates are dropping again... so you might change the above example to a 5 year ladder... 100K each rung 12 months or 50K to get money coming available without penalty every 6 months.

Fidelity even has tools to build the ladders for you if you want.

What a great explanation! Thank you so much!
I like this idea a lot. We don't know when we might need it, but we think that two years out is as far out as we'd like to go. Laddering seems like a good way to go.

 

[targatom2019]

I used to have 3 CDs at Wells Fargo and each was around 200K. I had 1 under my name, 1 under my wife's name and 1 under a living trust and FDIC covered all 3 accounts.

 

[CindyBlue]

CindyBlue, do you have any accounts at Fidelity?

They could be a good option and they have offices you can visit in person if you have questions, even though I don’t know if that’s true in your location (they tend to be in more populated areas).

Online is safe. I’ve used a high yield savings account from Synchrony with no problems and I’m sure Ally is the same.

A local credit union is also a great idea. If you’re not comfortable with online, then I’d recommend opening up Google Maps and searching for local banks and credit unions. Then visit their websites to see what they offer. And if you have any questions, feel
free to ask here. There’s tons of people that are more than happy to help.

At 500k with today’s rates, you should be yielding at least 10k a year (conservative) and probably closer to ~12.5k year.

I just love the generosity of the people here on the FIRE forum! I am getting some great ideas! I did stop by our local highly rated credit union yesterday and broached the ideal of a CD ladder, and they seemed very helpful and it would (as best as I can figure) be free. That $3000 quote is irritating me more and more (grrr!!!)

 

[TNBigfoot]

You may want to explore other banking options CindyBlue. If they were proposing to make $3k off you for allowing you to purchase CD’s from them, I’m sure they are greedy elsewhere with their fees.

 

[Brat]

What Spock said... Fidelity has a tool so that you can choose FDIC insured CDs in the amount and duration you choose -build a ladder, you can choose to have them reinvested at maturity - no cost. Make an appointment with a Fidelity advisor for an explanation.

 

[Sun456]

Another option to CDs is a money market fund. In your situation I would choose FZDXX at Fidelity. There are alot of options (with different minimums) but this one has a $100K minimum that is paying 2.37%. If rates go down then these will do down also but you would have the same issue with short term CDs. Fidelity is a big investment firm with in-person offices and an online presence. They are easy to get ahold of by phone also.

https://fundresearch.fidelity.com/mutual-funds/summary/31617H805

The nice thing that you can treat it like a savings account and withdraw the money at any time. It is not FDIC insured but is generally considered very safe. I put they type of fund in bold italics so you could look it up.

As mentioned above Fidelity also has an easy to use CD ladder tool so you could park the funds in FZDXX while you figure out what you want to do.