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Vanguard IRA Brokered CD's vs Traditional IRA CD's
Old 08-29-2018, 11:59 AM   #1
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Vanguard IRA Brokered CD's vs Traditional IRA CD's

I'm planning on moving some IRA Stocks/Bonds (maybe $60k) to IRA CD's. I can do the transfers within Vanguard to the Brokered CD's or do a rollover to traditional bank IRA CD's.

I understand the differences in how these IRA CD's operate, but does anyone have a preference? It appears that the brokered CD's require a little more attention (i.e. when interest payments are paid to your MM account).
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Old 08-29-2018, 01:48 PM   #2
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I've stayed away from brokered CDs in favor of Penfed and Navy FCU CDs. Others have posted about success using brokered CDs. I like that I can cash out my CD any time I need and not lose principal, although I would lose some interest depending on the institution. With a brokered CD my understanding is you sell it on the market like a security and can only get what the market offers, perhaps more or less than your original amount.


These 2 provide a good rate in general, maybe not the top but the couple times I've checked with Fidelity CDs they were in the ballpark. Just my $0.02
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Old 08-29-2018, 02:54 PM   #3
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I've only bought brokered CDs. When they mature, the principal is automatically deposited into the brokerage account. I can make the decision on what to invest the money in next at my leisure.

I'm not sure why you think brokered CDs require more attention.
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Old 08-29-2018, 03:16 PM   #4
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Call the bond desk at Vanguard and ask your questions. The Schwab guys are great and I would expect no less from VG.
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Old 08-29-2018, 04:07 PM   #5
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Originally Posted by RetireBy90 View Post
I've stayed away from brokered CDs in favor of Penfed and Navy FCU CDs. Others have posted about success using brokered CDs. I like that I can cash out my CD any time I need and not lose principal, although I would lose some interest depending on the institution. With a brokered CD my understanding is you sell it on the market like a security and can only get what the market offers, perhaps more or less than your original amount.


These 2 provide a good rate in general, maybe not the top but the couple times I've checked with Fidelity CDs they were in the ballpark. Just my $0.02
NFCU /PenFed guy here, too. I've stayed away from brokered CDs for the reasons you mention. I also like having my fixed income in 3 separate buckets:
1. VG bond mutual funds
2. Direct CDs
3. I-Bonds

A major reason is that they're all conservative fixed income investments but with slightly different characteristics (advantages & disadvantages). By substituting brokered CDs for direct CDs I would be taking on one of the disadvantages of bond mutual funds (potential loss of principal during periods of rising interest rates) when I could protect myself from that risk with direct CDs (albeit at a slight interest rate reduction).
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Old 08-29-2018, 05:23 PM   #6
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I think I get your point about brokered CDs requiring more attention. Itís less of an issue now that MM rates are ~2%. When rates were near 0, there was a need to get the dividend payments into something that pays better. At this point in time I would consider them equal and take the best rate or use some of each. I have CDs at 4 different credit unions but Iím likely to go with brokered CDs in the future.
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Old 08-29-2018, 07:11 PM   #7
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Originally Posted by jkern View Post
I'm planning on moving some IRA Stocks/Bonds (maybe $60k) to IRA CD's. I can do the transfers within Vanguard to the Brokered CD's or do a rollover to traditional bank IRA CD's.

I understand the differences in how these IRA CD's operate, but does anyone have a preference? It appears that the brokered CD's require a little more attention (i.e. when interest payments are paid to your MM account).
I have a number of traditional bank CDs through internet banks (Ally, Synchrony, Discover, etc). One thing with these banks, they always run a credit check for each new CD you open, even if you are an existing customer. Not a problem, unless you have a freeze on your credit. I recently started buying brokered CDs through Schwab, and no credit check for these. So that is one advantage.
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Old 08-30-2018, 12:55 AM   #8
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I like having my eggs in different baskets under one hen house. Being able to choose from dozens of bank CD's at one brokerage is a great service.

An IRA here, a 401-k there, and savings at 2-3 other banks or CU's could create real confusion for the surviving spouse. Brokered CD's simplify it, I think.

A couple of years ago, I jumped on the IRA CD bandwagon for a certain CU that always pops up on this forum with rave rate reviews. Rates were OK at the time, but not fantastic. A couple of months later, I discovered brokered CD's. No exaggeration: the brokered CD's have beaten those CU rates about 95% of the time.

I know there are folks who don't mind spread sheeting a dozen financial institutions, but I'm not one of them.
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