money market or cd

[njhowie]

I am going to look for a six to eight month CD after the December rate hike.

If you have the money available now, there is likely little to be gained in waiting. On such a short-term CD, the difference in rates may not compensate for the 3 to 4 weeks in interest differential you'll miss out on by not doing it now. Then, there's also the possibility that after the Fed hikes, rates do not move.

 

[njhowie]

It is hard to know what to do with Pen Fed 3% cds that are maturing. This is a sizable amount and I'm currently retired with no pension and no soc. sec. yet. Lucky to get the 3% for 5 years and the difference between 2% (savings acct) and 3% (cd) means a lot more income for me. Decisions Decisions. I think I may commit some to 3% and stash some in a 2%+ savings to see if rates go up again after Dec. I was so hoping for 4%..... Does anyone think It is possible that if feds don't raise again in Dec., that we could lose the 5 year 3% rate? That's what I'm afraid of.

The first thing is to determine how long you are looking to lock up the money for? It sounds as though you are looking for up to 5 years if you can get a higher interest rate. There are some 4% 5 year CDs out there right now, but from what I've seen, they are from small outfits and only regionally available.

There is no way that we will lose the 5 year 3% rate. Current rates could remain flat, or potentially dip a little. However, it sounds as though you aren't up to date on the current CD rate picture. Open an account with Fidelity - right now you can get 3.1% for 2 years, 3.25% for 3 years, and 3.65% for 5 years.

Go with Fidelity, there's much less effort involved, the rates are always competitive, they offer a wide range of products, and they provide excellent service - especially if you are bringing a large account.

 

[foxfirev5]

With 40% of my total AA invested in CD ladders I have a little different take. I've got a big chunk, 8%, maturing this month. These would normally roll into 5 year CD's. However if rates hold at or above 3.5% I'm going with 7 year maturities. Not because they offer better rates, but rather to get my avg duration a tad closer to the bond funds they replaced. I have no idea where rates are going but certainly can imagine a slowdown and rate drop sometime in the next few years. If not then my income will continue to grow as I roll the ladder. Just at a little slower rate.


Currently I've got enough in interest and dividends to more than meet my budget. Now I just need to avoid getting too fancy.

 

[njhowie]

With 40% of my total AA invested in CD ladders I have a little different take. I've got a big chunk, 8%, maturing this month. These would normally roll into 5 year CD's. However if rates hold at or above 3.5% I'm going with 7 year maturities. Not because they offer better rates, but rather to get my avg duration a tad closer to the bond funds they replaced. I have no idea where rates are going but certainly can imagine a slowdown and rate drop sometime in the next few years. If not then my income will continue to grow as I roll the ladder. Just at a little slower rate.

Completely agree!!!

I think lots of folks are getting a little too comfortable with this "rapid" rise in rates we've seen, expecting it to simply continue, and holding out for even higher rates before committing. I have vivid memories of 0.01% money market rates barely 3 years ago - which were in place for about 7 years. 3.5% to 3.9% may not be awesome, but it is perfectly acceptable - much more so than having everything matured and then stuck with 0.01%.

 

[frank]

I found a 6 month cd for 2.85 and was thinking of going with that to see what happens by june. is it a bad idea to go with cd or would money market at 2.35 be a better idea?

 

[njhowie]

I found a 6 month cd for 2.85 and was thinking of going with that to see what happens by june. is it a bad idea to go with cd or would money market at 2.35 be a better idea?

Nothing wrong with that if you are ok with not touching the money for 6 months.

Consider though - for six months, the difference in money is only going to be $2.50/$1000...and if the Fed raises interest rates in two weeks, the money market rate will go up shortly after, narrowing the difference further.

I would opt for the money market fund in this case. I'd want the flexibility to take the money before 6 months if I saw a CD or some other investment pop up before 6 months rolls around.

 

[RAE]

I found a 6 month cd for 2.85 and was thinking of going with that to see what happens by june. is it a bad idea to go with cd or would money market at 2.35 be a better idea?

2.85 percent for a 6-month CD is a very good rate right now. I don't see how you can go wrong with that deal. Even if the fed raises rates once more, CD rates are not going to skyrocket in the next 6 months.