Advice on which account is better option for my $125,000 CD coming due

[Carol1862]

I have $125k CD due this week. I was going to transfer it into my Capitol One account and put it into a 3.8 12 month CD. The only account I have with them is a very small savings because the cashback on my CC goes into that account. However, Marcus if offering $1500 bonus if I open a savings account and leave money there for 90 days. Savings interest as of now is 3.65. I know it can drop in 90 days but doubtful it’ll be drastic. After 90 days I’d withdraw the money and close the account. Might then put it into a CD at Capitol if they are offering a good rate. If not I’ll put it into my Vanguard MM and most likely decide on one of their CD’s.

Before you ask why a CD, we currently have our money mostly with Vanguard in a few of their accounts (60/40) and want some in cash as well.

 

[Car-Guy]

Take the $1,500 for 90 days and then decide. The difference between 3.8% and 3.65% on $125k for 3 months is less than $50.

 

[jazz4cash]

I think Marcus also has a .25% referral bonus if you know anyone that already has an account. If not I’m sure someone here could assist. I do wonder if they would pay both bonuses, though

 

[Al18]

I would probably put it into a 5-8 year deferred fixed rate annuity (MYGA) at an insurance company rated A or higher. I see at Guaranteed Fixed & Income Annuities | Blueprint Income yearly rates are 5.20%-5.40% and you can typically withdraw up to 10% per year with no penalty.

 

[Carol1862]

I would probably put it into a 5-8 year deferred fixed rate annuity (MYGA) at an insurance company rated A or higher. I see at Guaranteed Fixed & Income Annuities | Blueprint Income yearly rates are 5.20%-5.40% and you can typically withdraw up to 10% per year with no penalty.

Thank you. That didn’t cross my mind. I’ll look into it

 

[mrfeh]

Thank you. That didn’t cross my mind. I’ll look into it

Putting something into a 5-8 year vehicle vs a 12 month CD are 2 very different things. Need to decide what the time horizon is for this money.

That being said, I'd take the $1500 for 3 months.

 

[pb4uski]

+1. Just the $1,500 bonus alone for 90 days is the equivalent of ~4.8% annual return and then you have the 3.65% interest so it ends up like a 90 day CD at 8.45% I think.

 

[Al18]

Keep $25K in Capital One savings account, paying about 3.25% and put the other $100K in the Fixed rate annuity, which you can withdraw up to $10K per year for spending.

 

[Stormy Kromer]

What are your needs for this money ? Short term there is nothing wrong with the CD you mention. Long term, explore other options and hang on.

 

[Bruno]

I chased a lot of bonuses and made some good money but got tired of keeping up with all the 1099.

 

[PERSonalTime]

Is Marcus FDIC protected?

 

[Nastywarnob]

I would ask what your purpose and horizon is for the money. The recommendations of buying an annuity frankly puzzle me unless you are seeking dependable income over a period of time. In general, their excessive fees are a non-starter for me.

Also, state income tax should be a consideration for you as well…here in Minnesota, every dollar is taxed a 5.35% on up to 9.85%. That’s a compelling argument to drive me to Treasuries and Treasury funds (such as SGOV) which are MN-state-tax-free.

These are simply considerations as I do not have all your specifics, thus your mileage may vary….just throwing out other considerations here.

 

[erkevin]

Is Marcus FDIC protected?

Absolutely. Marcus is a Goldman Sachs.

 

[jim584672]

You could check https://www.depositaccounts.com for CD rates across the country.

The 90 day T-Bill is bout the same as a 90 day CD, no state taxes, can be bought at a brokerage and sold at any time.

 

[Carol1862]

I would ask what your purpose and horizon is for the money. The recommendations of buying an annuity frankly puzzle me unless you are seeking dependable income over a period of time. In general, their excessive fees are a non-starter for me.

Also, state income tax should be a consideration for you as well…here in Minnesota, every dollar is taxed a 5.35% on up to 9.85%. That’s a compelling argument to drive me to Treasuries and Treasury funds (such as SGOV) which are MN-state-tax-free.

These are simply considerations as I do not have all your specifics, thus your mileage may vary….just throwing out other considerations here.

I brought up the annuities to my DH who stated exactly what you did.
We have no plans or need at this time for the money. Thank you for the treasury bond info. I know we have some I-Bonds.

To give some background, we retired a little over 10 years ago. We are on SS, no pensions. Our portfolio has increased. We are comfortable, own our home (newer so large improvements, appliances and repairs shouldn’t affect us for a while) our car (recently purchased) ) and vacation throughout the year. We leave soon for 2 weeks and another trip planned for Europe this summer. We take smaller trips to see family and friends. So, as for this money, it’s just another form of long term investment/income preservation.

Thank you everyone for your replies.

 

[Onda]

From my experience with Marcus, and based on what I’ve seen with Capital One’s acquisition of Discover, I’d avoid Capital One for this.

 

[ShokWaveRider]

MYGA with an A rated or better company would be my vote.

 

[COcheesehead]

Here’s a think outside the box option.
Invest in HOSAX. The NAV remains remarkably steady and it pays over 6%
It has a Sharpe ratio, a measure of risk adjusted return, of almost 3 which is unbelievable high. Well above any other similar investment,

 

[Al18]

Nastywarnob,
You are absolutely wrong about the fees on a MYGA - they are very low and are NOT paid by the individual buying the annuity. If a MYGA advertises 5.40% interest per year for 6 years, that is precisely what the purchaser receives, down to the penny. Interest is compounded on a MYGA, just like a CD you buy directly from a bank or credit union. At the end of 6 years, you get all your money+interest returned to you, or you can renew the MYGA at the prevailing interest rate.

One advantage of buying a MYGA is the interest from a MYGA is deferred until money is withdrawn.

 

[COcheesehead]

Nastywarnob,
You are absolutely wrong about the fees on a MYGA - they are very low and are NOT paid by the individual buying the annuity. If a MYGA advertises 5.40% interest per year for 6 years, that is precisely what the purchaser receives,

A lot of people don’t understand how fees are applied to this or other investments. They always think it’s comes out afterward.

 

[Nastywarnob]

Nastywarnob,
You are absolutely wrong about the fees on a MYGA - they are very low and are NOT paid by the individual buying the annuity. If a MYGA advertises 5.40% interest per year for 6 years, that is precisely what the purchaser receives, down to the penny. Interest is compounded on a MYGA, just like a CD you buy directly from a bank or credit union. At the end of 6 years, you get all your money+interest returned to you, or you can renew the MYGA at the prevailing interest rate.

One advantage of buying a MYGA is the interest from a MYGA is deferred until money is withdrawn.

A lot of people don’t understand how fees are applied to this or other investments. They always think it’s comes out afterward.

Nastywarnob,
You are absolutely wrong about the fees on a MYGA - they are very low and are NOT paid by the individual buying the annuity. If a MYGA advertises 5.40% interest per year for 6 years, that is precisely what the purchaser receives, down to the penny. Interest is compounded on a MYGA, just like a CD you buy directly from a bank or credit union. At the end of 6 years, you get all your money+interest returned to you, or you can renew the MYGA at the prevailing interest rate.

One advantage of buying a MYGA is the interest from a MYGA is deferred until money is withdrawn.

Nastywarnob,
You are absolutely wrong about the fees on a MYGA - they are very low and are NOT paid by the individual buying the annuity. If a MYGA advertises 5.40% interest per year for 6 years, that is precisely what the purchaser receives, down to the penny. Interest is compounded on a MYGA, just like a CD you buy directly from a bank or credit union. At the end of 6 years, you get all your money+interest returned to you, or you can renew the MYGA at the prevailing interest rate.

One advantage of buying a MYGA is the interest from a MYGA is deferred until money is withdrawn.

 

[Nastywarnob]

I made no such blanket statement against all annuities. In fact, in my statement I even mentioned there are scenarios where an annuity makes sense. The key input I asked is what was their timeline and horizon. In the case of an MYGA, you are locking up the money for a longer period of time in exchange for the fee structure.

And what happens if you want to terminate early? Fees.

 

[Al18]

Most MYGA's allow you to withdraw up to 10% per year, with no penalty. If you cash in a 5 year CD early, you typically loose a year of interest. If you're cashing in a CD early, there's a problem with your planning. I've had many, many CD's in my life and never cashed in early.

 

[Nastywarnob]

None of these assumptions you’re making fit the use case for the poster above. In fact, they never provided the answer to their horizons or needs. The fact that you keep beating the drum for MYGAs is leading me to wonder if you’re in the business of selling them.

In short, my position (which does not necessarily conflict with yours) is that annuities can have a purpose for certain use cases. However, I think most of us here can agree that they certainly do not apply to all use cases.

At this point in my retirement, I have a personal disdain for anything that locks me into any direction. I also have a disdain for fees. My position is perfectly defensible as is yours, and I’m perfectly willing to agree to disagree.

 

[Diogenes]

Before you ask why a CD, we currently have our money mostly with Vanguard in a few of their accounts (60/40) and want some in cash as well.

Vanguard's Prime Money Market Fund currently pays around 3.62%. Could that be a viable alternative to short-term CDs?