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Ridiculous CD rates - where now
Old 09-13-2020, 03:47 AM   #1
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Ridiculous CD rates - where now

I have CDs spaced out over the next few years, but with the rates so low where else can you put safe money and get a descent return ?


Thinking about some short term bond funds ?
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Old 09-13-2020, 04:57 AM   #2
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No idea of current rates, but you could look into SPDAs (Single Premium Deferred Annuity.) Years ago, I beat current CD rates with a SPDA. The SPDA had a short term (3 years.) IIRC, I beat CDs by 1%. Penalties for early withdrawal were fairly severe as I recall, so caution advised. Just a thought so YMMV.
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Old 09-13-2020, 05:25 AM   #3
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Thereís a thread where members report current rates for CDs and other similar options, here https://www.early-retirement.org/for...101376-19.html
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Old 09-13-2020, 06:19 AM   #4
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When rates are so low and there looks to be no place to go, that's when anxious folks chase yield - possibly looking for an extra 0.25% in what appears to be only a little risk. Don't do it. It will be enticing, but don't do it.

With rates so low, they will move higher, and when they do, all fixed income is going to get whacked. It's a fools games to chase yields at this time. The opportunity cost of passing up "a deal" or just sitting in cash is minimal. Don't tie your money up for so little return and take additional risk. Definitely not worth it at this time or if rates go even lower.

Be patient, you will be paid for use of your cash in time.
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Old 09-13-2020, 07:13 AM   #5
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The system is broken and the Federal Reserve is the root cause.
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Old 09-13-2020, 08:52 AM   #6
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With about 30x annual expenses ( or 50x this year ��) in a CD ladder I feel your pain. However I'm not seeing any solutions to offer. Ride it out until conditions improve. Hopefully in the long run the equity side will come to the rescue.
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Old 09-13-2020, 09:19 AM   #7
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The system is broken and the Federal Reserve is the root cause.
The system is not broken for those that thrive on cheap money. The responsible savers have become just another resource to be exploited.
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Old 09-13-2020, 09:41 AM   #8
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Methinks they want to mitigate against the Stock Market taking a dump. That effects a lot of folks here. (Not me) I am one of the poor saver shmucks being taken advantage of. Well at least in mid 2021 I will be.
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Old 09-13-2020, 10:37 AM   #9
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I have CDs spaced out over the next few years, but with the rates so low where else can you put safe money and get a descent return ?


Thinking about some short term bond funds ?
There is no such thing as safe money with a decent return. There is safe money with a "decend" return i.e. you will slowly loose to inflation.

You might put some cash into a fund like Vanguard Short Term Investment Grade (VFSUX). Some modest risk but has a short duration (2 years) so money put in for that time should probably keep up with inflation. I own some of this. No guarantees.

https://investor.vanguard.com/mutual...overview/vfsux
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Old 09-13-2020, 01:12 PM   #10
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No idea of current rates, but you could look into SPDAs (Single Premium Deferred Annuity.) Years ago, I beat current CD rates with a SPDA. The SPDA had a short term (3 years.) IIRC, I beat CDs by 1%. Penalties for early withdrawal were fairly severe as I recall, so caution advised. Just a thought so YMMV.


Is that same as MYGA (multi year guaranteed annuity)? I will consider these products when the time comes to replace my maturing CDs.
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Old 09-13-2020, 01:59 PM   #11
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Is that same as MYGA (multi year guaranteed annuity)? I will consider these products when the time comes to replace my maturing CDs.
Yes.
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Old 09-13-2020, 02:14 PM   #12
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I still have CDs at 1.90% .. but that will expire early next year. My 2.35% CD just expired. Now this is my solution since I still have house payments ....

I shift all my mortgage balance to a 2.99% HELOC , and that's where I will park my cash. I put $60,000 of my idle cash into my HELOC account, and I'm saving $150.00/month in interest payments. So, that's like earning $150/month

If I really need that cash, I will just issue myself a HELOC check. But since it is just idle cash, I don't think I will need since I still have 1.5 years of emergency cash.
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Old 09-13-2020, 03:53 PM   #13
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Originally Posted by Lsbcal View Post
There is no such thing as safe money with a decent return. There is safe money with a "decend" return i.e. you will slowly loose to inflation.

You might put some cash into a fund like Vanguard Short Term Investment Grade (VFSUX). Some modest risk but has a short duration (2 years) so money put in for that time should probably keep up with inflation. I own some of this. No guarantees.

https://investor.vanguard.com/mutual...overview/vfsux
This. For a long time I kept some cash in a fund like that, but I basically abandoned that and how just have equity and bond funds and when I need money I look at where I think I should rebalance.
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Old 09-13-2020, 03:57 PM   #14
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This. For a long time I kept some cash in a fund like that, but I basically abandoned that and how just have equity and bond funds and when I need money I look at where I think I should rebalance.
VFSUX is a bond fund. Perhaps you mean intermediate bonds when referring to bonds? I have those too, but if I need cash it generally comes from VFSUX.

Taking it from equities is certainly a source too.

I think the future is clearly pointing to taking more risk now. Eventually this may go away but everyone needs animal spirits now to help us get back to growth and fuller employment. For the super savers it is not a pretty picture.
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Old 09-13-2020, 04:00 PM   #15
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We have CD's @ ~4% till August 2021.
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Old 09-13-2020, 04:04 PM   #16
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Is that same as MYGA (multi year guaranteed annuity)? I will consider these products when the time comes to replace my maturing CDs.
I'm glad ShokWaveRider could answer your question. I haven't kept up since my last sort-term SPDA foray. I DO still have a couple of SPDAs from WAY back. They are yielding a minimum of 4.5%. Sounded pretty low at one time, heh, but now are good as gold. What I really wish I had more of are I bonds from the late 90s/early '00s. Talk about gold! But wishes are NOT horses. Good luck in your search. Right now, my cash is in my checking account - losing money. YMMV
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Old 09-13-2020, 04:14 PM   #17
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Is that same as MYGA (multi year guaranteed annuity)? I will consider these products when the time comes to replace my maturing CDs.
You should also check out any state insurance for these products, as they are not FDIC insured like CD's.
Additionally, the higher yielding MYGA's will typically have lower rated credit ratings.
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Old 09-13-2020, 04:25 PM   #18
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You should also check out any state insurance for these products, as they are not FDIC insured like CD's.
Additionally, the higher yielding MYGA's will typically have lower rated credit ratings.
Good idea to check on these as Dtail suggests. Also check to see if they are considered to be in the "pool" (for want of a better technical term) that insurance companies use to pay claims on other insurance instruments when insurance companies occasionally DO go out of business. As always, YMMV.
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Old 09-13-2020, 07:26 PM   #19
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Methinks they want to mitigate against the Stock Market taking a dump. That effects a lot of folks here. (Not me) I am one of the poor saver shmucks being taken advantage of. Well at least in mid 2021 I will be.
Yes, IMO it’s all about protecting the credit markets (cheap credit!) which protects the stock market.

Personally, I’m not sweating super low interest rates for a couple of years.
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Old 09-13-2020, 07:45 PM   #20
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Good idea to check on these as Dtail suggests. Also check to see if they are considered to be in the "pool" (for want of a better technical term) that insurance companies use to pay claims on other insurance instruments when insurance companies occasionally DO go out of business. As always, YMMV.


Yes. Good points wrt lack of FDIC and being familiar with individual state guarantee association limits. I donít worry much about limits or credit ratings since I just have fairly small sums at risk in this type of product. I will diversify, ladder, and stay short/intermediate to mitigate risk.

As far as verifying if a particular investment is part of a pool, Iíd be surprised if one could get any benefit of protection from the state guaranty assoc without being in the pool. In that case the providerís credit rating would be critical.
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