Ally no-penalty 11 month CD now at 1.5%

[audreyh1]

Quote:

Originally Posted by JOHNNIE36 Sorry, I didn't read the entire thread, but was wondering why anyone wold be interested in CD's paying those low interest rates. Please enlighten me. What is the attraction? Safety for sure, but can you really afford these low rates? I was always one for safety first, but my wife got mad and said enough of this BS. We are not tying up our hard earned money to get that piddley low return. As our CD's matured, we moved them all into Vanguard Wellesley. That was two years ago. We are really happy with that move. Thanks to all on this forum for their investment recommendations. No more CD's for us. I'll go back when they start paying the 5% they used to. I'll take a little risk for now.

These CDs are only for the cash portion of our investments, and only part of it at that.

[Sunset]

Quote:

Originally Posted by JOHNNIE36 Sorry, I didn't read the entire thread, but was wondering why anyone wold be interested in CD's paying those low interest rates. Please enlighten me. What is the attraction? Safety for sure, but can you really afford these low rates? I was always one for safety first, but my wife got mad and said enough of this BS. We are not tying up our hard earned money to get that piddley low return. As our CD's matured, we moved them all into Vanguard Wellesley. That was two years ago. We are really happy with that move. Thanks to all on this forum for their investment recommendations. No more CD's for us. I'll go back when they start paying the 5% they used to. I'll take a little risk for now.

I understand your feelings as do most folks.
This is only for money that we might spend in the next 3 years.

Your opinion of CD's would be a lot different if the market dropped 50% today, or does it over the next week, and then stays down there for a few years, maybe 10 years ?

The trick with market drops is only after the market recovers do you know how long it lasted, when you are in them, they can last months to decades to get to full recovery.

[kaneohe]

Quote:

Originally Posted by JOHNNIE36 Sorry, I didn't read the entire thread, but was wondering why anyone wold be interested in CD's paying those low interest rates. Please enlighten me. What is the attraction? Safety for sure, but can you really afford these low rates? I was always one for safety first, but my wife got mad and said enough of this BS. We are not tying up our hard earned money to get that piddley low return. As our CD's matured, we moved them all into Vanguard Wellesley. That was two years ago. We are really happy with that move. Thanks to all on this forum for their investment recommendations. No more CD's for us. I'll go back when they start paying the 5% they used to. I'll take a little risk for now.

Wellesley has done a nice job over the last 10 yrs
VWINX Vanguard Wellesley® Income Fund Investor Shares Fund VWINX chart

Roughly a 90% return over that period,just slightly lower than a total stock market fund and w/o the -50% dip of the TSM fund. A good lesson that there is a price to pay for avoiding risk. Still Wellesley did take a nearly -20% dip
in 2008 for nearly a year so if you needed the funds then, that might have been a problem.

[catotx]

Interested. How easy is it to break this no-penalty CD at Ally? Do I have to call in or can it be done online? Thanks.

[gauss]

Quote:

Originally Posted by catotx Interested. How easy is it to break this no-penalty CD at Ally? Do I have to call in or can it be done online? Thanks.

If it is like their other CD products that I have used in the past you can do it either way. Since I had a 3rd party linked bank account, the funds were in my account within a couple of days.

If you are truly concerned, then I suggest opening a small CD (say $100). Wait six days and then break the CD. If everything works to your liking then go ahead and move your big money in.

-gauss

[jetpack]

You can do it online, very easy. Clearly shows exactly how much you'd be getting if you cash in today.
Click into cd from accounts page, click "Disbursement Method", select "Early Withdraw" on left.

[supernova72]

I started using Ally one year ago post ER and am really impressed with the on-line bank. Easy to use website and even allows you to add a note to why you did a transaction.

I just have a savings account currently but at 1.05% that is much better than my credit union. Thanks to this site I moved it there based on other posters giving Ally the thumbs up.

[GalaxyBoy]

For me, these CDs will be for the chunk of cash I have set aside for a house purchase (IF I can ever find one we like). This is short term cash I can't afford to lose principal on, so a fund isn't appropriate IMO.

[audreyh1]

Quote:

Originally Posted by catotx Interested. How easy is it to break this no-penalty CD at Ally? Do I have to call in or can it be done online? Thanks.

There is a place to do it online.

[catotx]

Thanks to everyone who responded to my question about breaking an Ally CD. Sounds good to me!

[calmloki]

Just noticed something - the Ally CD interest can be paid at maturity, monthly, or quarterly via credit to an account, paid by check, or as a credit to the CD.

If paid monthly as a credit to the CD does the CD's interest accumulating value grow over the 11 months, so that at the end of 11 months you are earning interest on 10,137.50+ vs. $10,000?

If you opt to wait to be paid the interest until CD maturity, say 6-1-2018, does that mean you have no interest income on it in 2017? Some tax ramifications there.

[Sunset]

Quote:

Originally Posted by calmloki Just noticed something - the Ally CD interest can be paid at maturity, monthly, or quarterly via credit to an account, paid by check, or as a credit to the CD. If paid monthly as a credit to the CD does the CD's interest accumulating value grow over the 11 months, so that at the end of 11 months you are earning interest on 10,137.50+ vs. $10,000? If you opt to wait to be paid the interest until CD maturity, say 6-1-2018, does that mean you have no interest income on it in 2017? Some tax ramifications there.

Looks like you can do it 2 ways. So pick which is better.

from https://www.irs.gov/publications/p17...link1000171541

"
When To Report Interest Income

When to report your interest income depends on whether you use the cash method or an accrual method to report income.
Cash method. Most individual taxpayers use the cash method. If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. However, there are special rules for reporting the discount on certain debt instruments. See U.S. Savings Bonds and Original Issue Discount (OID) , earlier.


Accrual method. If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Interest is earned over the term of the debt instrument."

[audreyh1]

Quote:

Originally Posted by calmloki Just noticed something - the Ally CD interest can be paid at maturity, monthly, or quarterly via credit to an account, paid by check, or as a credit to the CD. If paid monthly as a credit to the CD does the CD's interest accumulating value grow over the 11 months, so that at the end of 11 months you are earning interest on 10,137.50+ vs. $10,000? If you opt to wait to be paid the interest until CD maturity, say 6-1-2018, does that mean you have no interest income on it in 2017? Some tax ramifications there.

The CD compounds daily, so as long as you don't withdraw interest you'll earn the same amount on the CD even if you don't get it credited until maturity.

In terms of taxable income, I assumed it wouldn't show up on a 1099 unless credited to my account during that year.

[kaneohe]

Quote:

Originally Posted by calmloki ................................. If you opt to wait to be paid the interest until CD maturity, say 6-1-2018, does that mean you have no interest income on it in 2017? Some tax ramifications there.

.............................."Unless you make changes, this setting will automatically default to the interest disbursement option associated with your CD term.
12 month or less – interest is credited to your CD at maturity
.................................................. ......
You can change how often and where your interest is credited on your current term in online banking........................................... ..........."

You remain a cash basis taxpayer in both cases. By telling Ally how often to credit interest to your account, you determine how much your interest for that year will be. It is not always clear ahead of time what the best selection is.
If you have possibly large dividend/cap gains distributions late in the year and are worried about exceeding some income threshold, you can leave the default of pay at maturity stand which means your income is lower this year but higher next year. Might have to do a late December election for Ally.

[CountingDown2014]

Just noticed this last night and converted all of my CDs that were at the old 1.5% rate which was relatively easy to do online...

[nwsteve]

Quote:

Originally Posted by CountingDown2014 Just noticed this last night and converted all of my CDs that were at the old 1.5% rate which was relatively easy to do online...

+1 . Did likewise yesterday. Wanted to do all at once with our 3 CD's so opted to talk to rep. He must have been a new hire as I could tell he was following a script very closely.
When we got to setting up the new CDs, he informed me that all new accounts required a credit check. I was pretty sure for existing clients that this was NOT true. Since all our credit is frozen (thank you Equifax ;-( ), I asked him to check with a supervisor or put one on the phone. Sure enough no credit check for existing clients.
Entire process including about 5 min to get the supervisor issue resolved, took about 30 min for the three accounts--each has to be done in sequence.

[retired1]

Yep, it's pretty good deal. I opened one. Great place to park temporary cash.

[kaneohe]

Quote:

Originally Posted by nwsteve +1 . Did likewise yesterday. Wanted to do all at once with our 3 CD's so opted to talk to rep. He must have been a new hire as I could tell he was following a script very closely. When we got to setting up the new CDs, he informed me that all new accounts required a credit check. I was pretty sure for existing clients that this was NOT true. Since all our credit is frozen (thank you Equifax ;-( ), I asked him to check with a supervisor or put one on the phone. Sure enough no credit check for existing clients. Entire process including about 5 min to get the supervisor issue resolved, took about 30 min for the three accounts--each has to be done in sequence.

Appreciate your posting your experience here . Might be useful since I'm in the same frozen boat.

[EQMAN]

Just did mine. Took 30 minutes on the phone after waiting for about 10 minutes to get the trust group on the line. Thanks for the update.