New at PenFed - 3% 5yr certificates

[brewer12345]

I need to do some rebalancing by selling equities and may want to go with CDs rather than putting more money into bonds. However, I would really prefer to wait until next year when my taxes are lower to incur capital gains. Does anyone have some thoughts on whether these 3% rates are likely to stick around next year, go up, down, etc?

They seem significantly higher than everyone else, so it's hard to know what to make of it right now.

Pen Fed used to offer a year end special with above market rates. This may be what they are doing. If so, no guarantees the rate will be around for long. How about borrowing to fund the CD and then liquidating equities in early january to pay off the loan?

 

[Tom52]

Thanks for the heads-up. I had a chunk of cash sitting around so bought two 5 yr CDs this morning. I might even look at some of my existing CDs at Penfed to see if it would make sense to cash them out and get back in at 3%.

 

[OAG]

I need to do some rebalancing by selling equities and may want to go with CDs rather than putting more money into bonds. However, I would really prefer to wait until next year when my taxes are lower to incur capital gains. Does anyone have some thoughts on whether these 3% rates are likely to stick around next year, go up, down, etc?

They seem significantly higher than everyone else, so it's hard to know what to make of it right now.

This is where a low rate HELOC (tax deductible) would come in handy. Would work as a bridge. The last time (2010) PenFed had a 5% 10 Year CD program - it was great while it lasted but we have not seen 5% FDIC/NCUA CD's since then to my knowledge. Wher rates go from here is anyone's guess.

 

[Spanky]

Thanks for this. Going to try and break up into a bunch of $1000 and $2000 accounts so I don't take a bath on the entire thing if I need to withdrawal....

Does Pen Fed offer partial withdrawal?

 

[wolf]

Thanks for posting this. I jumped on this offer to replace a 1.85% 3yr-CD maturing in January.

How did you purchase a CD in December, if your 1.85% 3-yr CD is maturing in January ?

 

[brewer12345]

Even though I don't really need more CDs, I could not resist. Jumped in for a taste of 3% risk free. I broke my modest CD amount into 4 pieces so I could break relatively small amounts if need be. Been buying 5 year CDs for at least 10 years and never had to break one yet, but its nice to have options.

 

[FIREd]

How did you purchase a CD in December, if your 1.85% 3-yr CD is maturing in January ?

I borrowed from my emergency fund and will put the money back when the 3yr CD matures next month.

I also redeemed a low yielding CD at Ally this morning and rolled the money into another one of those 3% 5yr CDs at Penfed bringing my CD ladder yield back over 4%.

 

[Debinnov a]

I feel so silly. I completely should have divided my $$$ into more than just two five year CD's (approx $175K each) - just in case. I fully intend NOT to need the money, but since the interest/result would be the same whether two CD's or five CD's - it would have been the smart thing to do. Oh well... I'm just starting to learn about all of this - hopefully I won't blow this whole early retirement thing!

Deb

 

[OAG]

I feel so silly. I completely should have divided my $$$ into more than just two five year CD's (approx $175K each) - just in case. I fully intend NOT to need the money, but since the interest/result would be the same whether two CD's or five CD's - it would have been the smart thing to do. Oh well... I'm just starting to learn about all of this - hopefully I won't blow this whole early retirement thing!

Deb

I believe they give you 7 days to change your mind. May just pay to give them a call to break the amounts down.

 

[audreyh1]

Even though I don't really need more CDs, I could not resist. Jumped in for a taste of 3% risk free. I broke my modest CD amount into 4 pieces so I could break relatively small amounts if need be. Been buying 5 year CDs for at least 10 years and never had to break one yet, but its nice to have options.

Man - you guys are putting the fire under me!

This could replace some short/int-term bonds in my retirement fund which aren't paying out as high a rate at the moment.

But first I have to open an account!!!

 

[sheehs1]

Thanks for posting about these PenFed CD's. I just routed money into 4 of these Cetificates! I did it over the phone (opened and funded). 3% is the best I've seen!
Had opened an account years ago, never used it until now.

 

[Ready]

According to bankrate.com, the next highest yielding 5 year CD is with "Virtual Bank", at 2%. The PenFed rate is 50% higher than the next highest rate. I find this highly unusual, and something tells me it may go away soon. Perhaps they are trying to attract money to the bank, but I suspect it will come in very quickly, and once they reach the amount they were looking for, I expect they will withdraw the offer. I still think it may be a while before we see 3%+ rates widely available again from banks or credit unions.

I took all of my emergency savings that was not already in CDs and transferred it to PenFed this morning. I already have a car loan with them, so it was pretty easy to do. Funny thing is my car loan is only at 1.99%. I can't even justify paying it off early with the money I had in local savings with these CD rates available.

 

[brewer12345]

According to bankrate.com, the next highest yielding 5 year CD is with "Virtual Bank", at 2%. The PenFed rate is 50% higher than the next highest rate. I find this highly unusual, and something tells me it may go away soon. Perhaps they are trying to attract money to the bank, but I suspect it will come in very quickly, and once they reach the amount they were looking for, I expect they will withdraw the offer. I still think it may be a while before we see 3%+ rates widely available again from banks or credit unions.

I have had the same thoughts. I see people shrieking about 3% all over the interwebs, so I imagine the hot money is pouring in. They will likely pull the plug on this before the end of the month.

 

[Debinnov a]

Hmmmm.... maybe I should call them and split up the CD's a bit more.... now I'm scrambling to see if any other free money. If the rates will only hold out until my company sale closes (hopefully by end of January), that would be sweet as I will have alot more to invest.

Fingers crossed!

Deb

 

[sheehs1]

I have had the same thoughts. I see people shrieking about 3% all over the interwebs, so I imagine the hot money is pouring in. They will likely pull the plug on this before the end of the month.

I asked about this and the rep I had said the rate would be there until the end of January. That said...they could pull it at any time.

 

[sheehs1]

I took all of my emergency savings that was not already in CDs and transferred it to PenFed this morning. I already have a car loan with them, so it was pretty easy to do. Funny thing is my car loan is only at 1.99%. I can't even justify paying it off early with the money I had in local savings with these CD rates available.

Ready...the rep told me car loans were 0.99% now. I just checked and they are advertising this. Wonder if you could redo yours? Just a thought.

 

[brewer12345]

I asked about this and the rep I had said the rate would be there until the end of January. That said...they could pull it at any time.

The customer service reps do not make pricing decisions.

 

[sheehs1]

The customer service reps do not make pricing decisions.

You are correct. That's why I said, they could pull the rate at any time.

 

[Ready]

Ready...the rep told me car loans were 0.99% now. I just checked and they are advertising this. Wonder if you could redo yours? Just a thought.

I think that is only if you buy a car through their car buying service, where they would likely earn a commission for the referral. Otherwise the rate is 1.99% for new, used or refinance loans. Still not a bad rate though!

 

[Sue J]

How are you transferring large amounts into PenFed? PenFed limits incoming ACHs to $5000 a day and my banks won't let me send more than $10,000 a day to another institution.

I'm just doing this online, are you able to transfer larger amounts over the phone?

 

[audreyh1]

How are you transferring large amounts into PenFed? PenFed limits incoming ACHs to $5000 a day and my banks won't let me send more than $10,000 a day to another institution.

I'm just doing this online, are you able to transfer larger amounts over the phone?

Hmmm - I was not notified of any such limit online.

I opened a CD online and gave the ACH transfer info directly for that and it didn't complain about the amount >$10K.

I don't expect my bank checking to limit it either as I have had larger transfers in the past, although the transfers have always been initiated from another financial institution.

The Fidelity limit is $100K.

 

[Ready]

No restrictions for transferring more than $10K either here. Just a simple ACH transfer from a different bank.

I just noticed that Credit Union West in Arizona now has rates of 2.95% for 5 year CD's with $50K or more, and 3.2% for IRA CDs with $50K at 5 years as well. Maybe rates are finally rising?

 

[sheehs1]

SueJ. I transferred large amounts into 4 CD's over the phone or at least what I consider large. They were all definitely more than the limits you talk about. The rep didn't tell me about any transfer limits. The transactions are "posted" on the PenFed site as if the CD's have been funded with yesterday's date.
However, the money has not ACH transferred from my bank accounts yet. If they have not transferred by tomorrow...I will call "someone". Either PenFed or my bank.

I've not received any notification about transfer limits yet either.

I could have done it online but she told me I would have to set up a "non Penfed" external transfer account and wait 3 days for them to ping back and forth with .50 cent pings (according to the rep). She told if I did it over the phone, I could do it immediately.
So...that's what I did.
Hope the rep knew what she was doing..

 

[audreyh1]

Do note that the penalty for breaking one of those 5-7 year certificates is 365 days of interest.
So if you break the cert at the one year mark you earn 0%
if you break at the two year mark you earn an effective 1.5%
if you break at the three year mark you earn an effective 2%
if you break at the four year mark you earn an effective 2.25%
Go to maturity? 3%

Just saying. I'm in for an amount that is normally kept as fast emergency money. Stocks may make more - historically - but this is interest earning mattress money.

This kind of matches (or slightly beats) their shorter term 2-4 year CD rates:

6 Month 0.300% 0.30%**
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%
5-Year 3.000% 3.04%
7-Year 3.000% 3.04%

 

[RunningBum]

Thank kind of matches their shorter term CD rates.

That is good to know. As long as you can hang on at least 2 years you won't do worse than a shorter term CD. If rates go up, you can just break it then and be in the same shape as the shorter term.

Vanguard to PenFed transfer limit must be well over 5K or 10K. Seems like I've done close to 100K before.