Current CD rates in your area

D

danno1

Recycles dryer sheets
Joined
Apr 4, 2008
Messages
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I have a CD maturing at the end of this month. I am currently keeping my eyes open for a better rate. In this area of Michigan, I see 3.5% as being a popular number. What is it in your location?
 
Good hearing from you again OAG (I recall you replied to one of my priors) . . . 4% sounds great...but in this economy, not sure I want to be tied up a minimum 5 years. I already tossed a bunch into 5 & 7 year tax deffered mma's last fall - so . . . . .
 
May I ask a question about CDs?
I currently don't own any. My mom had $50K in CDs and lived off the income to supplement her SS income. She didn't seem to get a lot of extra cash flow from them. Time frame of purchase was 1970s and 1980s, and she habitually rolled them over until 2001 when she passed. I have no idea what rates, principal or term (maturity) her CDs were.
I understand about the safety of CDs and the corresponding lower interest rates. I have researched CDs online.
But I feel like I am somehow missing something...:rolleyes:
It seems to me that current CD interest rates and the fact that the interest is taxable doesn't seem to be a win-win as an income investment.
Please correct me if I said something wrong and maybe educate me about using CDs in ladders.
If this should be a separate thread, moderators please take the right action.
 
Hi Freebird: You have things to take into consideration on that money:
1. If you are working and want to put that in a longer term CD, let it COMPOUND
2. If you are working (and don't need THAT money immediately) and want to plan for
your future, put it in an IRA (better than CD's as anyone here can attest to)
3. If you are self -employed, don't need that other CD money, put it in a TAX DEFERRED mmoney market account
4. I could go on & on but this is what I mean about OPTIONS.

Ask yourself how soon you'd need that money. But if you have steady income, now is the time to research where to invest that excess cash. Having that excess cash is a God-send thanks to your mom - bless her soul and good fore thought!
 
danno1 said:
Hi Freebird: You have things to take into consideration on that money:
1. If you are working and want to put that in a longer term CD, let it COMPOUND
2. If you are working (and don't need THAT money immediately) and want to plan for
your future, put it in an IRA (better than CD's as anyone here can attest to)
3. If you are self -employed, don't need that other CD money, put it in a TAX DEFERRED mmoney market account
4. I could go on & on but this is what I mean about OPTIONS.

Ask yourself how soon you'd need that money. But if you have steady income, now is the time to research where to invest that excess cash. Having that excess cash is a God-send thanks to your mom - bless her soul and good fore thought!
Click to expand...
Thanks for the response. I know this is really basic stuff, and I appreciate your patience. :flowers:
I am FIREd. I am 50 yo. My income is a survivor pension and a fixed annuity (govt TSP converted when I resigned).
I am considering CDs as my next investment vehicle after I do some DCA to existing stock MF for a couple of years. I already have a modest portfolio now set at 40/60 AA. I own EE, I and muni bonds (in MFs only).
If there is a link you could provide that gives a good tutorial (i.e.CDs 100), please post it.
I've read a lot of investments books, and CDs get a cursory treatment at best. Authors assume everyone knows about CDs.
I must have been asleep in class that day. ;)
Capital preservation seems to be the best reason for CDs, along with the FDIC insurance backing them.
I think what my brain can't get wrapped around is this...
Let's say I took $10K in today's dollars and put it in a 1 year CD, earning 2% for simplicity. I rolled it over every year faithfully for 10 years, maybe getting better interest rates down the road. I cash it out at age 60.
Will I pay taxes on the interest earned every year, or all at once when I cash it out in 10 years? Will the $10K principal plus interest keep pace with inflation over 10 years?
 
I noticed two CD ads in today's local newspaper. I consider both of them to be of questionable quality.

The 3-month CD offered a rate of 5.15% and the 12-month CD is being offered at 3.45% APY. Neither is being "offered" by a bank. The ad states the name of two different "financial services" companies with simular addresses. Both are advertised as FDIC insured and in micro print, one has the following "(name of firm) LLC is offering FDIC insured CD's with the intent to introduce our services and other insurance products."
 
danno1 said:
I have a CD maturing at the end of this month. I am currently keeping my eyes open for a better rate. In this area of Michigan, I see 3.5% as being a popular number. What is it in your location?
Click to expand...

That sounds great here in MO it is only 2.8%
 
freebird5825 said:
May I ask a question about CDs?
I currently don't own any. My mom had $50K in CDs and lived off the income to supplement her SS income. She didn't seem to get a lot of extra cash flow from them. Time frame of purchase was 1970s and 1980s, and she habitually rolled them over until 2001 when she passed. I have no idea what rates, principal or term (maturity) her CDs were.
I understand about the safety of CDs and the corresponding lower interest rates. I have researched CDs online.
But I feel like I am somehow missing something...:rolleyes:
It seems to me that current CD interest rates and the fact that the interest is taxable doesn't seem to be a win-win as an income investment.
Please correct me if I said something wrong and maybe educate me about using CDs in ladders.
If this should be a separate thread, moderators please take the right action.
Click to expand...

I do not want to belabor the point but to each his own insofar as possible growth. I have been using CD's for 30 years (all FDIC and mostly at Federal Credit Unions). Since I have been virtually 100% CD's for that time I should be considered biased on the subject. I would also point out that CD's CAN be used for IRA's too (both Roth and Traditional). While rates are LOW today they are SAFE, so it depends on what you want for your money. I have ALWAYS gone for the longest term of CD's for money I did not need to use for that period - in most cases the CU or Bank will let you take the interest periodically (apparently your Mother did this). I guess the argument today could be made that the Stock Market has gone so low that 5, 7 or 10 year money can only go up - but being pretty risk adverse I do not believe it. BTW I would take the Bankrate information with a "grain of salt" as I have never found them to be the best available and they seem to never tell you about NCUA (Credit Unions) rates (which usually are a lot better).
 
freebird5825 said:
May I ask a question about CDs?
I currently don't own any. My mom had $50K in CDs and lived off the income to supplement her SS income. She didn't seem to get a lot of extra cash flow from them. Time frame of purchase was 1970s and 1980s, and she habitually rolled them over until 2001 when she passed. I have no idea what rates, principal or term (maturity) her CDs were.
I understand about the safety of CDs and the corresponding lower interest rates. I have researched CDs online.
But I feel like I am somehow missing something...:rolleyes:
It seems to me that current CD interest rates and the fact that the interest is taxable doesn't seem to be a win-win as an income investment.
Please correct me if I said something wrong and maybe educate me about using CDs in ladders.
If this should be a separate thread, moderators please take the right action.
Click to expand...

This is a question of alternatives. If you want something low risk that will generate some return for a specified period of time, you can buy bonds or CDs. Treasuries and agencies yield well under what competitive CDs offer. Munis have higher credit risk (don't have backing of the feddle gummint). All other alternatives (corporates, MBS, etc.) have even higher risk. So CDs beat out these alternatives on a yield and/or risk basis.

Many CDs also offer a special option: If the fine print allows, you can often cash in a longer term CD in return for a penalty of 6 months' interest. So you could take Pen Fed's 5 year 4% CD and if rates spike in 2 years you just pay the penalty (2%) and go for a higher yield elsewhere. Can't do that with any bonds (except savings bonds, which pay squat in interest). Cheap embedded options are nice to have.
 
freebird5825 said:
May I ask a question about CDs?
I currently don't own any. My mom had $50K in CDs and lived off the income to supplement her SS income. She didn't seem to get a lot of extra cash flow from them. Time frame of purchase was 1970s and 1980s, and she habitually rolled them over until 2001 when she passed. I have no idea what rates, principal or term (maturity) her CDs were.
I understand about the safety of CDs and the corresponding lower interest rates. I have researched CDs online.
But I feel like I am somehow missing something...:rolleyes:
It seems to me that current CD interest rates and the fact that the interest is taxable doesn't seem to be a win-win as an income investment.
Please correct me if I said something wrong and maybe educate me about using CDs in ladders.
If this should be a separate thread, moderators please take the right action.
Click to expand...

To answer your question on CD ladders to provide income. As an example, in 5 successive years you can buy, say, $50K of CD's (that's a total of $250K).

In 5 years time the first CD matures so you take it's 5 years of accumulated interest and buy another 5 year CD for $50K. You then to continue to take the accumulated CD interest from each CD that matures and buy another 5 year CD.

Note that you pay taxes every year on interest that is accumulating - not at the end - for CD's that are in taxable accounts. (you get a 1099-INT from the bank or credit union)
 
BTW PENFED is now paying a .25% BONUS if you ROLLOVER a maturing CD. They are granting the .25 when you set the CD to ROLLOVER ON-LINE. So their best current rate (for maturing CD's) becomes 4.25% APY.
 
OAG said:
BTW PENFED is now paying a .25% BONUS if you ROLLOVER a maturing CD. They are granting the .25 when you set the CD to ROLLOVER ON-LINE. So their best current rate (for maturing CD's) becomes 4.25% APY.
Click to expand...

When you roll over a CD can you extract the accumulated interest on the maturity date? Or is that considered cashing in and buying another one?
 
You can "extract" the interest monthly, quarterly, semi-annually, annually, or let it "roll into" the CD, at least at PENFED and others. It does get a bit tricky at PENFED in that if a months (or more) interest is allowed to "accrue" to the CD the "value" of the CD is increased to the value of the original amount PLUS the interest. After that point withdrawals, if taken, will be based on the interest earned on the previous month end balance. They do allow you to switch your (accrue or get paid the interest) options on a monthly basis. So to answer your question if, at PENFED, you allow the interest to accrue (to get the full APY versus the APR) at maturity you now have a CD which includes the accrued interest and that amount is the rollover amount since once allowed to accrue you cannot "extract" it except at maturity or early withdrawal (with penalty). This is the only institution that does it the particular way that I know of.
 
OAG said:
You can "extract" the interest monthly, quarterly, semi-annually, annually, or let it "roll into" the CD, at least at PENFED and others. It does get a bit tricky at PENFED in that if a months (or more) interest is allowed to "accrue" to the CD the "value" of the CD is increased to the value of the original amount PLUS the interest. After that point withdrawals, if taken, will be based on the interest earned on the previous month end balance. They do allow you to switch your (accrue or get paid the interest) options on a monthly basis. So to answer your question if, at PENFED, you allow the interest to accrue (to get the full APY versus the APR) at maturity you now have a CD which includes the accrued interest and that amount is the rollover amount since once allowed to accrue you cannot "extract" it except at maturity or early withdrawal (with penalty). This is the only institution that does it the particular way that I know of.
Click to expand...

Good information - thanks very much. I've just been on-line to look at my CD's with penFed and can see where to change them :flowers:
 
Alan said:
To answer your question on CD ladders to provide income. As an example, in 5 successive years you can buy, say, $50K of CD's (that's a total of $250K).

In 5 years time the first CD matures so you take it's 5 years of accumulated interest and buy another 5 year CD for $50K. You then to continue to take the accumulated CD interest from each CD that matures and buy another 5 year CD.

Note that you pay taxes every year on interest that is accumulating - not at the end - for CD's that are in taxable accounts. (you get a 1099-INT from the bank or credit union)
Click to expand...

BTW, I'm actually being serious about all this. I really want to understand these CD critters.

The clouds parted and the sunshine came through...:cool:...catch me if I stumble anywhere here...

OK, each time a single CD matures, you use the principal ($50K) to buy another CD of equal value, hopefully at an equal or higher interest rate, and start all over again. I get the ladder part. :clap:
For each individual CD, the 5 yr compounded interest is mine to keep ONLY during the last year (maturity), minus Uncle Sam's cut each year of interest earned THAT year, for each and every one of 5 years as reported annually on the 1099.
I understand that the annual interest will be taxed as income, just like interest from a savings account would be, unless it was in a tax deferred account.
So I have to figure out if the total compounded interest earned on a CD every year for 5 years, being taxed annually at my current effective tax rate, will give me a positive net return after taxes and in the face of inflation for the entire period of compounding ?
No matter what, my principal is insured by either FDIC (banks) or NCUA (credit unions).

Do I get an "A" today? :flowers:
 
freebird5825 said:
BTW, I'm actually being serious about all this. I really want to understand these CD critters.

The clouds parted and the sunshine came through...:cool:...catch me if I stumble anywhere here...

OK, each time a single CD matures, you use the principal ($50K) to buy another CD of equal value, hopefully at an equal or higher interest rate, and start all over again. I get the ladder part. :clap:
For each individual CD, the 5 yr compounded interest is mine to keep ONLY during the last year (maturity), minus Uncle Sam's cut each year of interest earned THAT year, for each and every one of 5 years as reported annually on the 1099.
I understand that the annual interest will be taxed as income, just like interest from a savings account would be, unless it was in a tax deferred account.
So I have to figure out if the total compounded interest earned on a CD every year for 5 years, being taxed annually at my current effective tax rate, will give me a positive net return after taxes and in the face of inflation for the entire period of compounding ?
No matter what, my principal is insured by either FDIC (banks) or NCUA (credit unions).

Do I get an "A" today? :flowers:
Click to expand...

A :flowers:
 
Keep it simple, for instance, if you are in the 15% tax bracket, you would ALWAYS get to keep at least 85% of the interest (subject to state taxes, if any). And if the CPI (a imperfect measure but as good as any) is say 3% then the interest you keep is at least 82%. So if you get $100 of interest you would keep $82 of it. Kind of an oversimplification but as good as any IMO.


A+
 
Guys - TY so much. :flowers::flowers:
Rocket scientists sometimes cannot grasp the obvious. :LOL:
Now I can use those online interest compounding calculators in an intelligent way. All I ever took in college was Business 100.
Now I understand why my Mom put her proceeds from selling the house into CDs. She was very conservative and above all wanted to preserve her principal. Problem is I think inflation got in the way in later years because her CD interest was no longer covering her expenses.
My venture into CDs is a ways off, but I'm a long range planner type.

Back on topic...best low principal CD rate locally is 2.75% for a 1 year, minimum $1K CD. Or, the Jumbo CD rate is 2.85% for a 1 year, minimum $100K CD.
Both are offered by my credit union. Peanuts! :(
 
freebird5825 said:
Guys - TY so much. :flowers::flowers:
Rocket scientists sometimes cannot grasp the obvious. :LOL:
Now I can use those online interest compounding calculators in an intelligent way. All I ever took in college was Business 100.
Now I understand why my Mom put her proceeds from selling the house into CDs. She was very conservative and above all wanted to preserve her principal. Problem is I think inflation got in the way in later years because her CD interest was no longer covering her expenses.
My venture into CDs is a ways off, but I'm a long range planner type.

Back on topic...best CD rate locally is 2.75% for a 1 year, minimum $1000 CD. It is offered by my credit union. Peanuts! :(
Click to expand...

I love the low interest rates. Eventually that will shove a majority of people back into stocks. :)
 
freebird5825 said:
Back on topic...best low principal CD rate locally is 2.75% for a 1 year, minimum $1K CD. Or, the Jumbo CD rate is 2.85% for a 1 year, minimum $100K CD.
Both are offered by my credit union. Peanuts! :(
Click to expand...


Anyone can join Pen Fed and get that 4%...
 
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