How Many CD's Are Too Many?

[Drake3287]

Okay, first off I fully realize that CD's aren't the best investment, especially these days, so hold your comments on that part. But, I've done reasonably well over the years financially along with a great pension and can afford to weather the storm with these lower rates along with the mixed portfolio I have. At least I'll always have my cash.

My question is for those of you that still "ladder" your CD's. Just how many CD's is too many? And yes I fully understand the insured limits that FDIC accounts have. I'm thinking about opening a Synchrony Online Bank CD at 1% currently but I already have several very large ($100k+) CD's with different banks.

Is there a general rule of thumb for CD owners as too how many might make sense when using this laddering approach?

Thanks for your suggestions and thoughts.

 

[foxfirev5]

I think 84 is too many. Lately I've been buying Treasuries since they have equal or better rates. However I now have 104 combined. Who care's? The ladder is still only 5-7 years. Eventually I would like a 10-15 year ladder to cover my remaining years. In the interest of full disclosure the other 50% of my investments are in equities held in reserve.

 

[Dtail]

I use a ladder mix of CD's/MYGA's for my mom. Usually 3 to 5 depending on laddering depending on current yields.

 

[disneysteve]

My question is for those of you that still "ladder" your CD's. Just how many CD's is too many?

I'd say one for each "rung" of your ladder. If it's a 5-year ladder, that's 5 CDs. If it's a 10-year ladder, that's 10 CDs. If you want them maturing more often than once a year, that would increase the number. Every 6 months means 10 for 5 years, for example.



I'd also suggest looking into MYGAs as an alternative. They have higher rates, though also much steeper early withdrawal penalties.

 

[njhowie]

Depends when the CDs were/are purchased.

I currently have 148 CDs with maturities going out to 2029. About 50 of them are at rates at/above 3%, a couple above 4%.

The question shouldn't be "How many CDs are too many", but rather "How much of my fixed income allocation would I like to have in CDs"? I believe that should come down to some decision making based on the spread between CDs and your alternative fixed income options.

So, the answer for you is going to depend on your investment objective and your risk tolerance, just like everything else in this space.

 

[disneysteve]

I currently have 148 CDs with maturities going out to 2029.

I'm curious over what period of time those were purchased? What was the longest maturity at purchase?

 

[njhowie]

I'm curious over what period of time those were purchased? What was the longest maturity at purchase?

Most all were purchased when interest rates were higher - 2.15% is the lowest rate I have. I haven't purchased any in over 2 years until just recently when a few HSBC CDs with 2027/2028 maturities popped up on the secondary market for over 3% YTM. These are callable later this year and later next year, but with HSBC you never know - they are known to botch their calls periodically.

As far as longest maturity at purchase, I really couldn't tell you, because I did have some with maturities at/after 2030, but they were callable and were called.

 

[disneysteve]

popped up on the secondary market

Where do you shop for your secondary market CDs?

 

[njhowie]

Where do you shop for your secondary market CDs?

Fidelity.

If you have an account with them, go to this link. From there you can sort by yield to call, yield to maturity, maturity date, etc.

https://tinyurl.com/2jzjjz6v

If you want to manually navigate to that page:
News & Research dropdown --> Fixed Income, Bonds & CDs--> CDs & Ladders tab

From there, scroll down a little to the top of the new issue CD table. Slowly look at the line above "All New Issue CDs" and you'll see a line that says "New Issue CDs | Secondary CDs" - click on Secondary CDs. They keep it pretty well hidden if you're not looking for it.

I did also purchase secondary market CDs when I was with Etrade, and also on Merrill Edge. Chase YouInvest also provides for it. However, over the past 10 years, I've found that Fidelity is easiest to work with and most often has the best pricing.

 

[Drake3287]

To be honest, I never considered that some people had that many CD's in their portfolio. In my case I'm looking into opening a 6th with $100k+ and thought that might be a little unusual.

I guess disneysteve has it right when he referees to each as a rung on a ladder. Never thought of the obvious like that. In my case I really don't have a term set for when I might need any of this money.

 

[pb4uski]

+1 We have 4 CDs... pikers by comparison.

 

[foxfirev5]

I forgot about No Penalty CD's at my online bank. These were moved to my brokerage. With 52 week T Bills over 1% I constructed a rolling ladder in a spare account. I still have a number of 5yr CD's at the online bank maturing in 2023 & 2024 yielding over 3%. So I guess my total CD/Treas holdings are 116 issues. It's not very hard to manage since 108 are at one firm. When the online bank CD's mature I'm hoping to move them to long term CD/Treas at the brokerage.

These combined with years of accumulated Series I Bonds should cover my needs and provide income until the end of plan.

 

[Mark1]

Between DW and myself, we have 134 CDs within 3 different Fido accounts (IRAs/401K). I buy CDs monthly, and all are of the same amount and within 5 year ladders (with some rungs missing). With the current setup, it doesn't feel like too many CDs, but if I had them within 134 different bank accounts I'm sure I would feel differently.

 

[Montecfo]

I have 4 at 3.5% . I believe they mature in 2026. I recall thinking it was a long term but a great rate. As rates rise I can access 50 pct without penalty. Will be interesting to see if that makes sense.

More recently the 1 pct saving account is a better deal than any CDs, though I should perhaps look at secondary mkt. Have not in quite some time.

Also have I-Bonds but I'm not really doing a ladder. Just traditional fixed income alternatives.

 

[Chuckanut]

Most all were purchased when interest rates were higher - 2.15% is the lowest rate I have. I haven't purchased any in over 2 years until just recently when a few HSBC CDs with 2027/2028 maturities popped up on the secondary market for over 3% YTM. These are callable later this year and later next year, but with HSBC you never know - they are known to botch their calls periodically.

As far as longest maturity at purchase, I really couldn't tell you, because I did have some with maturities at/after 2030, but they were callable and were called.

I'm in the same boat. I have a few 2+% CDs that are maturing this month and next. Time to start scanning the CD market. I've gotten out of practice.

 

[OldShooter]

My uncle Pat was a CD yield seeker, always jumping to the highest yield in town (pre-internet) when renewing a CD. When Pat died, the executor had to literally visit every bank and S&L in town to see if Pat had money there. It would have been an almost impossible nightmare if Pat had the internet available and scattered the money all over the country.

So I would view this as a logistics problem to make sure that my executor had absolutely perfect records of where I had money parked. I might also bequeath to him a bottle of Excedrin to assist as he worked to get all those CDs retitled into the estate or for beneficiaries.

 

[pb4uski]

^^^ That is where brokered CDs can be handy, especially if you always hold to maturity it is no different than a bank CD but much more convenient.

 

[ShokWaveRider]

We have 2 (big ones) each paying 4% with local CU. Mature in 2024.

 

[disneysteve]

Between DW and myself, we have 134 CDs within 3 different Fido accounts (IRAs/401K). I buy CDs monthly, and all are of the same amount and within 5 year ladders (with some rungs missing).

I'm trying to follow this. If you build a 5-year ladder with monthly purchases, that would be 60 months if every rung was filled, but you have 134 CDs. That suggests that you buy more than one CD each month. I'm curious why you do that or what the advantage is.

I can't imagine having to keep track of having one or more CDs maturing every month. At least they're in retirement accounts so you aren't getting 134 1099s every year.

 

[Mark1]

Steve, it's three accounts (IRAs, 401Ks), so it equates to 180 CDs (60 X 3). Once a CD comes due, the proceeds just roll back into the "cash" account. I then use money in the "cash" account to purchase more CD's (usually 1,2,3,4 or 5 yr duration to fill a missing rung on my spreadsheet). It all happens in our Fido accounts, so it's not as hard as it sounds.

 

[VFK57]

We used to have over 1/3 of our portfolio in CDs but during past few years with 5 years CDs paying at most 1% vs inflation 7.9% and rising, it is slow loss of savings, moving money to stocks, farm land but stocks are sinking, especially when you buy them during past year. It is clear for most of us that a Geopolitical split of the world is happening in front of our eyes and where it is going to lead is very hard to foresee.

 

[disneysteve]

Steve, it's three accounts (IRAs, 401Ks), so it equates to 180 CDs (60 X 3). Once a CD comes due, the proceeds just roll back into the "cash" account. I then use money in the "cash" account to purchase more CD's (usually 1,2,3,4 or 5 yr duration to fill a missing rung on my spreadsheet). It all happens in our Fido accounts, so it's not as hard as it sounds.

So every month you have 3 CDs maturing that you need to roll into new CDs. Sure sounds like a lot of work. What benefit does that give you over perhaps ones maturing every 3 months or 6 months? Are you pulling out the income each month for living expenses and just rolling over the principal?

 

[gauss]

I saw the thread subject and thought the topic might be about audio CDs. LOL

-gauss

 

[Major Tom]

I saw the thread subject and thought the topic might be about audio CDs. LOL

Funny you should say that, because I often have the same reaction to these threads. CD's don't figure into my investment approach, though I know a lot of folk like the guaranteed rates.

 

[Bamaman]

I limit all my Fidelity accounts to 5 diversified equity accounts. I had one get too large, and I split it into an ETF thru Fidelity.

Any substantial cash is kept in the Ford Money Market at above market rates. My wife and I both have credit union accounts which are slush funds--for vacation, etc.

We have never had CD ladders because we don't want to have to monitor and move around money so often. It's bad enough that we're having to start RMD's this year and pay income taxes on more money per year than I ever made. But that can be a 1x per year occurance--depending on the markets. I like to keep things simple in retirement.