Earl E Retyre
Full time employment: Posting here.
- Joined
- Jan 1, 2010
- Messages
- 547
I want your opinion to help me make a big decision regarding CDs. I currently own 3 CDs at Andrews Federal Credit Union earning 3.01% each valued at about $160,000 (so a total of $480k). They mature in November (8 months from now). If I withdraw, the early withdrawal penalty is 1 year interest (total of $14,400 penalties for all 3 CDs).
Initially, I was thinking of just letting it ride, hoping that interest rates stay the same or continue to rise, and in November move to a 5 year CD at 5% or higher. But now I am concerned that interest rates could decline by November. I created some spreadsheets and it looks like 4.7% is about the break even point. That is, if interest rates decline below 4.7% by November then I would be better off breaking the CDs and taking the early withdrawal penalty. If interest rates stay at 5% for a 5 year CD or move higher then I would be better off not taking the penalty.
My current thought is that for a bird in the hand, assuming I can get 5% on a 5 year CD next week locked in for the next 5 years, that I would take the penalty. Another thought I had was to break 1 or 2 of the CDs and leave the other(s) in the 3.01%.
Opinions?
A couple other notes:
- I called Andrews and there is no option to not take a penalty and leave the money there.
- I want to keep this money in CDs (I already have enough in stock and real estate) – not looking to change asset allocation.
Initially, I was thinking of just letting it ride, hoping that interest rates stay the same or continue to rise, and in November move to a 5 year CD at 5% or higher. But now I am concerned that interest rates could decline by November. I created some spreadsheets and it looks like 4.7% is about the break even point. That is, if interest rates decline below 4.7% by November then I would be better off breaking the CDs and taking the early withdrawal penalty. If interest rates stay at 5% for a 5 year CD or move higher then I would be better off not taking the penalty.
My current thought is that for a bird in the hand, assuming I can get 5% on a 5 year CD next week locked in for the next 5 years, that I would take the penalty. Another thought I had was to break 1 or 2 of the CDs and leave the other(s) in the 3.01%.
Opinions?
A couple other notes:
- I called Andrews and there is no option to not take a penalty and leave the money there.
- I want to keep this money in CDs (I already have enough in stock and real estate) – not looking to change asset allocation.