Help with CDs...very new at this...

[CindyBlue]

CindyBlue;

A lot of good advice above, especially that if your cash is safe in banks with appropriate FDIC insurance, then a slow methodical approach in small steps is very wise.

We retired almost 6 years ago and kept our existing Vanguard retirement accounts which we have been very satisfied with, although transitioning to actively managing our investment accounts would have been easier initially if they had offices to meet face to face. Otherwise extremely happy with Vanguard. Like you we had a lot of cash in local bank accounts which we shifted 50% to Vanguard non-retirement accounts (since we were already retired) 2 years ago and put the remaining cash into 5%+ CDs at that time. With Money Market and fixed CD rates both below 5% we will likely open additional non-retirement accounts at either Fidelity or Schwab which both have offices 45 minutes or less from our home to take advantage of low cost fees and better investment opportunities. Looking to shift $500K but will start with $25K or less initially and see how the relationship/online system works for us before making a larger shift of cash.

Sorry for your loss and understand your concern with selection/management of investments. You mentioned working with a current and potential new tax preparer which is a smart move as you manage your loss and want to understand tax strategy in advance new investment decisions, while also taking age/retirement status into account. I would suggest a combined CPA/Financial Planner on an HOURLY basis (no contract). We live in the lower Hudson Valley of New York State and pay about $500/yr for combined simple tax return and a separate meeting for tax/investing discussion (usually discuss 3-5 items which we develop in advance of meeting).

All the best,

Thank you so much for sharing your experience - it helps so much to see how other people are handling it. Hourly sounds like the right thing for me. I pay $400 for my taxes to be done. and I'm betting a financial planner wwil be about that much per hour, right? We've tried to find one that will do an hourly fee for a few years now, but haven't been able to find one - don't know where to look or who to ask anymore. Maybe just look up CPAs in the book and call? Ask my tax lady? But I'll keep looking. Do you think someone at Schwab does tis kind of thing?

 

[CindyBlue]

Great news, CindyBlue. From your message you seem to be both an intelligent person and an extremely nice and caring person. Both these attributes will serve you well and you should be successful. Glad you are asking for advice here - while everyone here is a stranger, and you do not need to listen to everyone's opinions, at least you know no one here is out to rip you off. Coming here as a sanity check before making any major financial decisions can never be a bad idea.

You are so kind to say this...hope I live up to it (dsmile!)

And I so agree that this forum is a fantastic "sanity check" - and that I should have taken advantage of this forum before I went to Edward Jones (wry smile.) I hope people don't mind that I will be asking many questions yet again - the first time being as we were trying to figure out if we could afford to retire (which we did in 2019.) I know I can do this, I can...it's just that's it's so scary to have to do it without my husband. ..

I will call Schwab on Monday to make an appointment, and ask them if they can recommend an hourly financial advisor (assuming they dont' do that.) Also will ask at my bank, and ask my tax lady again if she can recommend someone besides Edward Jones.

And check in here...as I should have (smile)

 

[38Chevy454]

Depending on your total account value, Schwab likely has free advisor services. I know Fidelity does. Even at lower (relative) amounts, brokerage still provide some amount of face to face advisor time. Of course there's no free lunch as the saying goes. The advisor is going to try to sign you up for extra service levels, which they have available, at a most common percentage of the amount. AUM fee, assets under management, is that percentage. The percentage fee is instead of an hourly fee. That percentage is commonly around 1%, give or take a bit.

But importantly, your initial and follow up advisor in person meetings should be free of any cost. Just be aware that they have a desire to get you signed up for additional higher level service.

 

[CindyBlue]

Depending on your total account value, Schwab likely has free advisor services. I know Fidelity does. Even at lower (relative) amounts, brokerage still provide some amount of face to face advisor time. Of course there's no free lunch as the saying goes. The advisor is going to try to sign you up for extra service levels, which they have available, at a most common percentage of the amount. AUM fee, assets under management, is that percentage. The percentage fee is instead of an hourly fee. That percentage is commonly around 1%, give or take a bit.

But importantly, your initial and follow up advisor in person meetings should be free of any cost. Just be aware that they have a desire to get you signed up for additional higher level service.

Good to know that the initial and follow up in person meetings should be free of cost. And the main reason (besides the opinion of them not only here, but in many other places I read about online) that I didn't sign with Edward Jones was because I felt really pushed to do things fast, and I needed time to think and process. I feel better knowing I can - and should - take it slower.

I don't need help managing day to day finances, as the person at Edward Jones seemed to think - I'm sure some people do and feel better having someone to talk to about it and help them. That's all well under control. All I need is a place to put the bank money, preferably CDs for conservative safety, and also a place to put the money in the inherited and now combined 403bs, such as rolling it over to an IRA that is a good balance of safe and profitable...and where hopefully I won't have to take RMDs for the next three years.

I need this bank and 403b money for the unknown future - i.e., I need it to be there when I need it. It's scary having to make decisions about our hard earned and hard saved money. If I screw up, the consequences are not good, to say the least.

 

[Car-Guy]

Depending on your total account value, Schwab likely has free advisor services. I know Fidelity does. Even at lower (relative) amounts, brokerage still provide some amount of face to face advisor time.

They do, I've had one for decades. I think the number is 1+m. The problem is they switch them (AE's) around far to often. Some are good and some (many) not so much. But if you self manage, it's okay since you'll seldom need them. YMMV

 

[CindyBlue]

They do, I've had one for decades. I think the number is 1+m. The problem is they switch them (AE's) around far to often. Some are good and some (many) not so much. But if you self manage, it's okay since you'll seldom need them. YMMV

Showing my ignorance...what is an "AE"?

 

[Car-Guy]

Sorry, AE = Account Executive. I think if you hit 10+m they assign you one of their more senior AE's and are probably more likely to stay with assigned accounts/customers much longer. But I'm not "there" so I'm not sure about that. .

 

[Still Learning]

Thank you so much for sharing your experience - it helps so much to see how other people are handling it. Hourly sounds like the right thing for me. I pay $400 for my taxes to be done. and I'm betting a financial planner wwil be about that much per hour, right? We've tried to find one that will do an hourly fee for a few years now, but haven't been able to find one - don't know where to look or who to ask anymore. Maybe just look up CPAs in the book and call? Ask my tax lady? But I'll keep looking. Do you think someone at Schwab does tis kind of thing?

CindyBlue;

We found our CPA/Financial Planner through word of mouth. He owns a small local office after working in larger offices. He has been our go to person for 10+ years, provides good tax guidance and is 8 years younger than us. Find his thoughts on investing to be compatible with us but beyond some advice we still choose to manage our investing because A) I enjoy it and my wife is satisfied with my results and B) he is starting to close in on retirement age.

A referral from your tax preparer and an internet search for local options should provide good results if unable to secure references. I like having an independent investing/tax professional in the business to discuss specific ideas with and get targeted feedback along with tax advice. I do provide spreadsheets with investing and income growth projections for our meetings.

Unable to advise on a Schwab employee who provides services on the side. Perhaps somebody can provide advice on that.

 

[Gotadimple]

CindyBlue,
Don't call on Monday, it's a bank holiday and Schwab will be closed.

Schwab will/may assign you a dedicated rep (depends on the amount of investments you have with them). Overall, their customer service reps can answer all the same questions and have to be licensed as security representatives just as the AE's are. But your first meeting will probably be with an account executive.

I have an AE, he's not helpful because he's fairly new to the working world. But you were asking if the AE you will meet with would do your taxes. Probably not. They will refer you to a list of tax preparers or financial advisors who are independent from them but in their network for referrals. If you need a financial plan the AE can provide that for no additional fee and will discuss it in detail with you.

An AE gets assigned a book of customers for whom they act as a contact point. They earn a small commission on the amount of investments on deposit from their book of clients, but don't earn any excess commission if a client buys one investment over another. Based on their experience they get promoted to higher level account executive positions and the commission structure is different based on their role.

 

[pb4uski]

... I will call Schwab on Monday to make an appointment, and ask them if they can recommend an hourly financial advisor (assuming they dont' do that.) Also will ask at my bank, and ask my tax lady again if she can recommend someone besides Edward Jones. ...

Can you clarify what you think you need financial advisor for? The only reason that I am asking because often people think they need one but they don't really need one.

 

[Car-Guy]

Can you clarify what you think you need financial advisor for? The only reason that I am asking becuause often people think they need one but they don't really need one.

I have Financial Advisor or Account Exec (free) assigned to me at Schwab. Not for financial advice "in my case" but he's available to resolve issues or help expedite "things" that come up from time to time. Example, he's helping me setup a 401k rollover now. He's answering my questions and does most of the setup work. I just supply the funds.

 

[ychuck46]

You don't need EJ to buy CDs.

I suggest you end your relationship with them ASAP. They are not well regarded.

I would agree. Any "advice" they give will be simplistic and in EJ's best interest. CDs can be bought at one's own bank or bought online easily at other banks that might offer a better rate.

 

[LizaBBBB]

I went to the local Edward Jones office at the recommendation of two different tax preparers (the one we were using and the one I am moving to for next year (for a variety of reasons)) to get advice about moving the (large amount) money in my bank accounts into cds. She showed me a variety of CDs, and after a conversation with me that (about whether or not I'd need the money and for how long and how much of an "emergency fund" of cash I wanted to keep in the bank, etc.), she picked three CDs, one for 6 months and two for one year each. She said she gets paid by them in some way, that it doesn't cost me. Is this normal operating procedure? Is this how it works if I just went to, say, my local credit union and bought a CD myself? Sorry to be so clueless about all this...

I don't think brokerage CDs have FDIC insurance backing. You should check that out.

 

[mailbagman]

You don't need EJ to buy CDs.

I suggest you end your relationship with them ASAP. They are not well regarded.

Agreed, about 13 or 14 years ago before retired I went to 3 different financial advisors. Just to check out what they could offer me. EJ had some good ideas and actually I was in some of the stuff they suggested. but when I asked how their commissions worked, I was paying a lot more than the other two advisors. Costs will kill you. I do 99% on my own.

 

[RetiredHappy]

I don't think brokerage CDs have FDIC insurance backing. You should check that out.

They absolutely do and marked as such.

 

[orbops]

For such short terms (6mo and 1yr) you might want to consider a MM fund from a broker (like Schwab) They are paying more than CD's at this time and the money is available in one or two days without penalty. But, they are not FDIC protected and rates change frequently.

I was watching a Youtube video that talks about money market funds, and it is mentioned that money market funds held at a brokerage are insured for up to $500K from SIPC. The video at 11:15 talks about this coverage.

Also, the link below is the page from SIPC that explains the $500K coverage.

SIPC - Investor FAQs

Securities Investor Protection Corporation

www.sipc.org

I never knew that these money market accounts had higher coverage than FDIC coverage for CDs.

 

[SecondCor521]

@CindyBlue, I am very sorry for your loss. You've received a lot of good advice in this thread so far.

I took your advice and yesterday called and cancelled my relationship with Edward Jones. Also called my bank and made an appointment for next week. Also talked to a friend who is a money person (the exact capacity of which I don't know the name, but she used to deal with investments) and pretty much everything she said agrees with what you all here have said. We will meet this weekend to discuss options.

I'm ashamed to tell you all, since I've read so much about it here and should know better, how much money is in the four savings and checking accounts (his and mine, I need to combine them) but it's a lot. We kept meaning to move it to somewhere where it would make more money for us, but we didn't know how and it wasn't very important at the time...I know, silly us. But now that my husband has died (for those who haven't read my post about it, he was killed in a horrific accident two months ago, hit from behind while stopped at a stop sign), I want/need to do something about it, both for him and for me. It's what he wanted.

You don't need to be ashamed. Everyone starts from where they are. You're capable and will figure it out. Just take steps when you feel comfortable that you understand them like many here have been saying.

I did find out and confirm, thanks again to you all here, however, that because I put the accounts into a trust a couple of weeks ago at the suggestion of my lawyer, an unintended benefit is that all the beneficiaries are counted in the FDIC insurance coverage, thus negating my perceived need to get those CDs ASAP. The reason I was in such a hurry is because I'm so very far over the FDIC limit at my bank. I have four beneficiaries listed (my sister and my husband's three children) and with me, that makes five, and according to what I can read that makes me FDIC insured for up to $1,250,000. I can tell you that I heaved a huge sigh of relief when I found this out yesterday, and now I'm not in such a panic mode.

You might want to double check your FDIC coverage by using the following tool provided by the FDIC:

FDIC: Electronic Deposit Insurance Estimator (EDIE)

With an ad hoc test, it looks to me like the coverage is $250K per beneficiary, so you would be covered up to $1M if you have the four beneficiaries as you described. It does not look to me like you get an additional $250K for yourself, but I would recommend using the tool to be sure. It is a pretty easy tool to use I think.

I still have to figure out what to do about the RMDs I'll have to take for him, but as so many kind people here have said, I can slow down, I have time.

Under the most recent rules, you have until 12/31/2025 to take any of his year of death RMDs. You also have until 12/31/2025 to take any RMDs from any accounts you inherited from him. In other words, you have about 13 months to figure the RMD stuff out.

It might be more tax efficient for you to take any of his year of death RMDs this year, but if that's too much time pressure on you with the holidays etc., I wouldn't worry about it. It sounds like you have plenty of resources.

Thank you so much for sharing your experience - it helps so much to see how other people are handling it. Hourly sounds like the right thing for me. I pay $400 for my taxes to be done. and I'm betting a financial planner wwil be about that much per hour, right? We've tried to find one that will do an hourly fee for a few years now, but haven't been able to find one - don't know where to look or who to ask anymore. Maybe just look up CPAs in the book and call? Ask my tax lady? But I'll keep looking. Do you think someone at Schwab does tis kind of thing?

Although they both involve money, investment advice and tax advice are two very different areas.

Generally speaking, investment advisors are *terrible* at tax advice. I would never recommend getting tax advice from anyone at Schwab, Vanguard, Fidelity, or (especially) Edward Jones.

I would recommend finding someone who is a CPA and a partner or VP at a local, well regarded, long-standing CPA firm with multiple CPAs (like 10-20) and ask them if they'll do tax planning consultations with you on an hourly basis. Make a list of questions, schedule an appointment with them for an hour, ask your questions, note their answers, pay them, go home, and decide if you think they're good. If yes, accumulate more questions and then repeat the cycle. If not, try someone else.

The CPA I used a few times for similar tax planning advice was about $250 an hour but that was five years ago in a MCOL city. $400 an hour is probably in the ballpark now for someone who is good at what they do.

You *could* post your questions here, too. Either to doublecheck what the CPA says, or ahead of time to get some background, or instead of the CPA if you think our answers are good enough. This group is very smart and knowledgeable and helpful, but the one drawback is that it is hard to get a person's entire financial picture via a web forum (far easier in person) and fairly frequently the best advice depends on knowing the whole picture.

 

[1242Vintage]

Another “Not an EJ fan” here. Heard a sales rep pitch an annuity to a guy at the other end of the long table at Starbucks one morning. Took everything I had to not butt in and start asking the EJ guy questions about commission, performance, etc.

I’ve been using treasuries through Treasury Direct instead of CDs. Built up a nice treasury ladder and keep that rolling forward. Treasuries are approx. 20 percent of our portfolio.

 

[audreyh1]

I don't think brokerage CDs have FDIC insurance backing. You should check that out.

Yes they do as long as they are issued by an FDIC insured bank. You don’t lose the FDIC insurance just because they were bought through a broker. The CD listing at Fidelity clearly marks all the CDs offered as FDIC insured. It’s up to you to meet the $250K per person per bank FDIC limit in aggregate.

 

[urn2bfree]

Perhaps I missed it, but there is one tiny detail that needs to be addressed. You said you were referred to Edward Jones by a couple of tax advisors whom you trust. Aside from the fact that this was terrible advice, I would want to ask them to clarify their relationship with Edward Jones. Are they compensated for referring you to Edward Jones? If so, did they reveal that when they gave the advice? If not, they have revealed themselves as people not worthy of your trust.

 

[audreyh1]

I think another takeaway is don’t rely on your tax preparers to know good who the investment advisors are.

 

[ralash]

I went to the local Edward Jones office at the recommendation of two different tax preparers (the one we were using and the one I am moving to for next year (for a variety of reasons)) to get advice about moving the (large amount) money in my bank accounts into cds. She showed me a variety of CDs, and after a conversation with me that (about whether or not I'd need the money and for how long and how much of an "emergency fund" of cash I wanted to keep in the bank, etc.), she picked three CDs, one for 6 months and two for one year each. She said she gets paid by them in some way, that it doesn't cost me. Is this normal operating procedure? Is this how it works if I just went to, say, my local credit union and bought a CD myself? Sorry to be so clueless about all this...

You really don't need a face-to-face with Fidelity. Their website is great... once you are setup (you can do it all online), you can manage your CD portfolio with ease... shop durations and rates, buy, hold to duration, the interest redemption comes onto your account as cash... rinse and repeat! Piece of cake! When shopping, you can see FDIC INSURED, CALL PROTECTED, lots of info on the CDs you can choose. Rates are competitive... as the other poster said, the brokerage gets the CDs at a volume discount so that's how they get paid.

 

[ktdtx]

I may be ignorant but no longer see the reason to buy CD's--you commit your money for a specified period of time. Pay a penalty if you need it sooner and you can get higher rates in many money markets.

 

[Sunset]

I may be ignorant but no longer see the reason to buy CD's--you commit your money for a specified period of time. Pay a penalty if you need it sooner and you can get higher rates in many money markets.

It's simply to lock in a rate for a longer term.
Money markets will drop the rate paid as soon as interest rates drop.
Nobody can predict the future, maybe rates will rise, in which case CD's would be bad.

So I do a mix. I'm happy earlier I bought some CD's that are paying 6% and are good for 5 years unless called early, but surprisingly they are not being called, so I'm happy.

Today I might by a 2 yr treasury that is expected to pay ~4.4% , while the 3 month pays ~4.6%.

In the end, as person can only take their best guess as to what is a good investment at the time.

 

[Surewhitey]

I may be ignorant but no longer see the reason to buy CD's--you commit your money for a specified period of time. Pay a penalty if you need it sooner and you can get higher rates in many money markets.

Never done it, but brokered CDs are given a value daily for the secondary market. You may not be "penalized" if you are over 100 on value. Some of ours are 103...all are over 100. We also started doing 10 yr treasuries to go further out of the 5 yr CD's.