CD

artificialbutthole

Where did you find a 5.35% CD? When does the CD mature?

eth6113

I got a no penalty 11 month CD from Ally at 4.75%.

smallatom

I am a broker, and we buy CD’s from every bank yet I don’t see any above 5% for 5 years hence why I’m asking for a link to one

Billsport406

I believe doing a 12 month CD is the better deal if we're in for the short term. Thinking as I won't be giving up any interest when cashing in at full term. CD rates are above 5.0% up to $250000 as of March 23. Tax split is nominal.

shicken684

I guess, but if you've got more than 250k laying around in a single savings account you're doing something very wrong with your money. You should be putting most of that in CD ladders or something similar at the very least. Additionally, it's not that hard to just open another account. The only thing I think should be increased is maybe a 750k limit if you're a registered small business. That was the real issue with SVB. So many small and medium sized businesses got caught up in some bullshit that they could never had predicted or really prepared for.

Sunny_Hill_1

ROTH is just an account. You put the money up to the limit every year. How you use this money if completely up to you, you can let it sit in cash, you can put it all into CD, target fund, buy individual shares, IRS doesn't care. The only thing they care about is the actual contribution, which has a limit you can't exceed, but the dollars that are already in the account don't count towards that limit.

Sad_Huckleberry_6776

I’m about to pull the trigger on a 5 year brokered CD with 100k to invest. HYSA’s will drop in the next year. I’m also 54 and don’t really see any upside to increase my stress levels.

semicoloradonative

Nah...I have full faith in my investment strategy. And, yes it would. I need my CD $$$ in a year. Capital gains is 15%. I'll pay less in taxes on that CD than 15%.

semicoloradonative

Yea, I'm not really worried about taxes on $500 in interest on a $10k CD. As long as it isn't earning near 0% sitting in a savings account. I don't need the $$$ now, but might in a year. Easy access, no paperwork to set up, pretty much zero risk. Like I said, if I invested it in stocks, the dividends (and sale) would be double taxed too.

bluewave358

I sure hope not, unless my kids Lucky charms were tainted. Unless I am misunderstanding you, you have invested in CDs, which are a fixed income in a taxable account which is highly inefficient considering it is double taxed . My point is that in a taxable account, there are vehicles that are tax exempt and should be utilized over a CD depending on your tax bracket.

semicoloradonative

We? I'm responding to someone else that made a comment. Nobody is talking about fixed income, the original comment was about someone moving their 401k funds into more CD friendly funds. I responded to someone who responded to thinking about putting money in a CD. Are you high or something?

bluewave358

We are talking fixed income, not stocks. There are more efficient fixed income vehicles for your taxable account. Depending on your tax bracket you can lose up to 50% of your CD interest in taxes

semicoloradonative

Selling stocks and collecting dividends are also taxed by the Fed and the State, so I don't get your point. Yea, maybe there are "better" options out there, but that isn't where I felt best to put my money right now. Maybe when the CD expires in a year I might feel different but I'm not opening up an IRA or anything just to save a few $$ on taxes on one product.

dalownerx3

Tbills aren’t long term. Even with a bond ladder, there a risk interest rates may fall. The person is 55 which means the money will be locked up for at least 4 1/2 years. If the person can get a 5-year CD, the money will be available soon it’s accessible.

semicoloradonative

It's a regular CD, so taxable. Just like the brokerage account is taxable. I decided to not use the money to invest in stocks at this time and did a CD instead.

bluewave358

What happens when you eventually cash out your CDs at retirement. Do you pay capital gains or income tax? I assume you liquidate all your investments, so does the CD just get bundled in with stocks in terms of how taxes are handled?

semicoloradonative

I don't understand your question? I put the $10k in a CD...

kimjongspoon100

They could roll over a portion of the 401k to a brokerage that has a CD or TBill option. Then still grow their retirement tax free and avoid penalties

semicoloradonative

I'm sure he is investing in "CD's" through the 401k plan and not withdrawing to do it. Most plans have some version of this option.

semicoloradonative

I'm very similar. I recently had $10k to invest, but decided to put it in a CD at 5.35% rather than put in my brokerage and buy stocks.

TastiSqueeze

5% is arguably a bit low. Also, CD's are not necessarily a safe investment right now given the number of banks at risk of failing. Consider these items: 1. Can he improve safety by purchasing treasuries or some other instrument that is not at risk from bank failure? 2. Can he improve return, possibly by waiting a month or two for the market to absorb yesterday's rate change. 3. If he is over 50 years old, he should consider how much time before retirement. Higher returns are available in the market with index funds but with increased risk. This is a balancing act between risk and reward. 4. Most banks offering CD's are deliberately paying less than available low-risk investments elsewhere. With inflation currently running 6 to 7 percent, he is going negative with a 5% CD. In addition, he will have to pay tax on the 5% gain making it even worse. All in all, I would say a 5% CD right now is not a very good investment.

Fmbounce

Just to add a caveat...this also assumes the friend does it transfer within his 401k account, i.e. the friend didn't withdraw from the 401k to invest in CD's or else there's an early withdrawal penalty and might not be worth it. Not all 401k plans have options to invest in CD's.

borrowedbook1

Smart move. 5.25% on 3 month CD. That beats 99% on here.

hopingtothrive

If your friend is comfortable with the CD rates now they should create a ladder (various maturity dates 3 mo, 6 mo, 9 mo, 12 mo). Index funds will perform as you say, but those statistics are over a long time frame, 10-20 years. Your friend needs to decide what proportion of stocks/bonds is appropriate for his age and risk tolerance.

SimpleLeaff

yeah totally - did you get that 5 year CD within your 401k? Or with your regular investments? I think it might be a good idea to put some funds into a CD but hard to determine what allocation of total portfolio to allocate to such high yielding CDs - what % did u put in?

SimpleLeaff

the idea would be that the CD is held within the 401 so there would be no penalty as the penalty is only for removing out of the 401k

SimpleLeaff

yes i pointed that out in my post that its 8-10% so he will lose out but its interesting to consider putting portions of it in a CD

skilliard7

A week ago I got a 5 year CD that paid 5%, and it's non-callable(meaning the bank can't pay it back early)

smallatom

long term CD rates are not 5%. They are closer to 4%. Your friend is probably moving into a short term CD that pays 5%. Sure they'll get that guaranteed 5% but why you dont look up the average rate of return of the market the year after a bear market and see what they could miss out on.

SnS2500

I don't know, you'll have to ask them, but a possibility is 5k is locked up in something like a CD or bonds.

0Rider

my 11 month CD no penalty withdrawl is 4.9%

BlueLinePass

So if JPOW raises rates to the point I can get a guaranteed 5% on a CD why would I risk everything in the stonk market?

gnocchicotti

In other words, get out of treasuries and into equities because banks pushed treasuries into overbought territory? There seems to be a 1% spread between 1 year CD's and 1yr T-bills when I browse Schwab right now, is that unusually high?

Cool_Ad5407

Let's keep the high yield savings and CD rates going up I'm loving what's going on right now

TurtleIIX

THATS WHY THEY ARE CALLED UNREALIZED LOSSES. if the bank had to sell those assets say due to a bank run or if their total assets were worth less than their liabilities then they would have zero equity and effective be insolvent. No one is keeping their money in a bank that’s insolvent. That’s what caused the other bank runs. Also, yes that’s exactly what I’m saying. This problem is affecting world wide portfolios because interest rates were set to zero and then jacked up causing these losses. That doesn’t even factor in that these banks are losing money servicing those loans/ holding these bonds because they need to pay out 4%+ in CD returns and are collecting 2% on the majority of their bonds and MBS. Cash and new 1 or 2 year bonds are what I would invest in while this whole thing plays out. New bonds are even with inflation right now and should beat inflation if it continues downward. Also, if the Fed lowers rates again for whatever reason then they will go up in value and can be sold early for a greater profit.

purplebrown_updown

Money market or CD.

KarlsReddit

He wants massive growth with the stability of a CD and thinks this is a legitimate question. .And he makes too much money for a straight up Roth.

keinaso

So you received around 0.8% interest for the 10 months you held the CD. The guy that bought it is earning over 7% for the two months he is holding it.

borrowedbook1

SPY closed smack dab at the 200 day. That is very rare indeed. I'll just be watching tomorrow. Best guess is gap down then see wjat Bulls got left. My Boomer friends finally starting to notice shit. This ain't good. To a man/woman they are paying off debt as first move. CD"s second. T Bills third. No double down longs. Do with this what you wish.

Vast_Cricket

CD rates could bump up a fraction of a 0.1%. Longer 2 year ish?

EmployerSpirited3665

Yup, considering the longer duration CD's like 18- 2 years not sure I've seen much longer duration then that.

drew-gen-x

I completely agree. However I can get a 14 month CD with 4.3% interest. I am going to put some cash there. I can also pay off my car loan with 3.3% interest. There is also a cost associated with your mental health. Last 2 days I have sold 15% of my stock holdings. If we rally, I do still catch some of that upside. I am actually up today 1% since $GOLD is moving higher.

drew-gen-x

I might be making a huge mistake, but I've taken some money off the table in this market. I'm looking to re-enter that cash into gold, $SCHD, and $AVUV and some banking CD's. The risk vs reward of many individual stocks is above the amount of risk I feel like taking at this time. I am willing to admit I might be making a huge mistake but I am going to trust my gut feelings here.

GreatGatsby00

What does this mean for bank CD rates?

Vast_Cricket

Saving accout offer 4.2% , Treasury and short term CD.

JeffB1517

Probably "online" in this context means online only CD. Banks (and Credit Unions) make money three main ways: * profiting from duration risk (they can borrow short and lend long) * profiting from credit risk (taking on risk of non-payment others are not willing to take when it is profitable) * profiting from selling services. Rate chasing customers ("hot money") don't buy many services. They generally charge the banks something close to prevailing commercial interest rates for their deposits. They are from the bank's perspective lousy customers. But they can provide almost unlimited funding for duration or credit risk spreads. A bank doesn't want to depend on rate chasers, but they do want to have them in their back pocket as an alternative source of financing. There are some exceptions of banks that cater to rate chasers: Capital One, Ally, Discover, Synchrony ... But you will notice that all of them have very high capital needs, needs way in excess of any plausible deposit base, they do it from desperation not desire. Normal CD customers buy lots of services and charge the bank less than the prevailing rate. The bank likes that. If a bank needs money it may go to rate chasers to get it. But... these loyal customers get furious if the bank offers better CD rates to hot money than they do to them, punishing their loyalty. Moreover banks don't want to train their loyal customers to be rate chasers. So they have to somehow offer different rates to different customers in a way that doesn't create cross over. An online only rate is one such method. The idea being that people with a warm branch relationship don't hear about it (hopefully). While rate chasers who could care less about being friendly with their teller and local bank manager do hear about it. Using brokered CDs at a much higher rate is another similar method. Selling specialty accounts through a deposit broker is another. Generally these brokers are larger banks with lots of customers over the $250k limit. But there are smaller players like Raisin's offering: https://www.savebetter.com/.

LatterArmadillo

I got a 3 month CD thru my fidelity brokerage account at 5.1%, I’d def recommend over what you’ve listed

Vast_Cricket

I have been doing what you propoed for 8 months. Most of my gain now is from interest. I have analyzed and backtested S&P, djia, QQQ and others to their inception. S&P's 6 tech stocks carries 25+% weight. Except 1 these 5 top guns have not done well for sometime. A few people I spoke to are almost out of equity and put in step up letter Treasury, CD or even rental properties now. They may keep a few top tech stocks to time the market. If one can not diversify which 500 is not the tool they move to safer places.

lljc00

That's interesting. And I believe you. But like the OP suggested to anxious protection, I had a CD at 1.1% that I just took the 3-months early withdrawal penalty on, and put it into a 3.25% (direct with the banks, not brokered; this was a few months back). And for me, the interest difference was worth it. So I'm wondering why there's an advantage with just taking the early withdrawal penalty over yield-based market discount, and at what point (I realize there might not be a choice on which "penalty" to be subject to. But still curious).

InCraZPen

Ally No Penalty CD is 4.5 or 4.7. Can cash in anytime after 6 days.

NiceAsset

What specific high yield savings account? And I do not want to do a CD

bobdevnul

Yes, I was expecting the sale price of the CD to be lower than par with the CD being at a lower interest rate than currently - just like a bond.

valoremz

I don’t think you understand how good First Republic is at customer service. Customers love it. Low student loan rates for medical school, business school, law school, etc. Great mortgage rates for those same professionals. You get an assigned banker you can email for anything (wire transfer, set up a CD, ask random questions). And the inside of the bank is super nice.

xSAV4GE

Capital one is where I locked in my CD @ 5%

keinaso

I think the price you can sell the CD for reflects their value at the current higher interest rates. Whoever is buying them is going to want to get the same effective rate as they can get buying a new issue CD (or maybe a little better since it’s a one off). Bottom line you are probably not going to gain anything by selling and rebuying CDs.

Ioiwin

I guess I’m looking for a stable stock to invest in (if that exists). I’m just wondering if anything like this exists, similar to a stable value fund that I can invest in my Roth IRA rather than a CD or HYSA. If this doesn’t exist then leave my funds in a money market (SPAXX)?

7loUge

I'm not understanding your requirements then. You want something more stable than a CD that performs like a CD?

Ioiwin

I do have some money in CD already, I dl backdoors every year, wanted to invest in something a little more stable this year

Un-Scammable

Where is a good place to find a CD or HYSA?

7loUge

If you are looking for a stock that has returns similar to a CD, why not just put the money in a CD? It would be the same return with less risk.

xenxes

IF they come back, purely a confidence game ... bulls are betting that the FDIC timely implements some scheme to address uninsured deposits, probably a bump in standard deposit coverage, and a paid premium (maybe out of your CD rate) for amounts greater than the standard

LuckyOne55

FDIC website says: 'Second, ask your broker to confirm that the deposit account records for its brokered CDs reflect the broker’s role as an agent for its clients (for instance, by titling the account “XYZ Brokerage, as Custodian for Clients”). That way, each client who owns the CD can qualify for up to at least $250,000 in deposit insurance. This coverage is generally referred to as “pass-through” insurance because it bypasses the broker and is calculated based on the ownership interests of the individual depositors.' Source: [https://www.fdic.gov/consumers/consumer/news/cnspr13/cdsfrombrokers.html](https://www.fdic.gov/consumers/consumer/news/cnspr13/cdsfrombrokers.html)

WhileNotLurking

You own the investment. Your CD and treasury would be moved to your new account. If the bank went under that you invested your CD in - you have FDIC insurance. If your treasury goes under the entire financial system collapsed and you got larger issues.

ninkorn

Woah, Schwab is now offering CD Rates Up to 5.35% APY They really want your deposit, bruh

bobdevnul

>But yeah otherwise you get the accrued interest up until that point. Thanks for confirming that. I would have dumped the 1.5%-3% ones long ago if I had known that. The net for my example was $244 capital loss, plus $431 interest accrued. When I reinvest the proceeds at the current 5.3% my net gain for the remaining time of the CD is $424. I have not calculated the reduction in that for days uninvested from sale to settlement and days to get new CDs or T-Bills started.

AlternativeCupcake23

Current MS3 in a similar situation to you, but have dealt with no interest for 3 years now. I’ve done a mix of several things but most of them give me a guaranteed return because I want the loan money to be there when I need it. I have a CD ladder set up through Ally Bank in their 11 month no withdrawal fee CD that is earning 4.75%. I also have a liquidated amount in Ally’s HYSA earning 3.6% and contributed the max for myself and wife’s Roth IRA and have that money earning interest in a money market account. Honestly just having the HYSA and CD ladder is probably enough. T-Bills require a little more effort for not too much return. I have struggled with wanting to contribute to a Roth IRA versus keeping the money in a savings account to minimize how much loans I take out. I generally have settled on minimizing the loans because once the interest kicks in, it is essentially earning you a guaranteed rate of 6% to not take out more money. If you keep the interest and use it to further boost your savings account and don’t take out more money each semester, that would be the safest bet. Just thought I would add, make sure to not spend too much time and energy strategizing the best place to put your loan money, because in the long run it will make a negligible difference with your future earning potential. If you are going for a competitive specialty, your time will be much better spent preparing yourself for step and getting research experiences. Just my two cents!

Mo-Dawg99

Thanks for such a thorough response! I’ll definitely keep this all in mind. What are your thoughts on keeping the loans in a High-yield Savings Account compared to a CD?

bobdevnul

Interest on Ally accounts, including the No Penalty CD, is accrued daily. If you withdraw from a savings account or the NP CD you still get the interest for the days it was there. There is no need to go through the process you described. Be aware that you can't add money to a No Penalty CD. You also can't withdraw a partial amount. You have to withdraw the whole CD amount. You can have multiple NP CDs to make it more granular.

mulemoment

If you withdraw early from a CD you will pay some or all of the expected interest earned as a penalty. For example, if you have a five year CD you might pay one year's worth of interest or more as a penalty for early withdrawal. If you haven't earned that interest yet the money comes out of your principal. In your case you'd have to come up with that money to pay back to your loan provider. So, if you're going to use it as an emergency fund make sure you know the withdrawal penalty and that you can cover the cost of the early withdrawal if you need to do that. If you can, great that's a good option. Managing a T-Bill ladder doesn't make much sense compared to just opening a 3-4 year CD in your situation. You still have to pay taxes on your interest, btw. The rest yeah you stick in the stock market. > Or thoughts in general on which of the three options or other ones you can think of) would be a great, safe place to store and make use of the extra loan money. You may want to open a Roth IRA since you qualify to contribute because you're married and your wife works. You can currently contribute for 2022 and 2023, and then for your next several years through fellowship and up until you start making real doctor money. The money grows tax free but you can withdraw all your contributions to pay off your loans. You can invest into treasury bills, CDs, or stock through your Roth IRA and in this situation you don't have to pay taxes on the earned interest.

borrowedbook1

Just rolled my house money into a 3 month CD. Over 5%. My broker asked me if I cared about splitting to make the max 250k. I said I didn't care. Interesting thing is the bank with the CD wouldn't allow me MORE than 250k. So I ended up splitting anyway. There is some kinda clue here. I can't figure out what tho. Anyway. 5% risk free. I have a raging blue veiner! FWIW RBC is now expecting a 25 tomorrow. They were at pause.

greytoc

It's generally simpler to invest in a brokerage account since brokers provide access to the capital markets for investing. Banks are depositories designed for safe-keeping of assets - not investing. I'm usually downvoted by people that don't seem to understand this basic difference between a savings account and a brokerage account. If you are seeking to invest in CDs which are offered by banks, it's probably simpler to keep your funds in a brokerage account which offer access to brokered CDs. It can also be simpler to build a CD ladder in a brokerage account than at a bank that limits you to the bank's own CD products. Lastly - if you have more than 250k in savings - you can spread your emergency fund between different bank CDs more easily in a brokerage account. You can't do that in a single bank account. Some brokers also offer bank sweep programs so that uninvested cash can be swept between different depositories (ie banks) so that no more than 250k is at a single bank. And if you need liquidity - you can also use money market funds. You can adjust the yield and risk using treasury, government, and/or prime money market funds. Money market funds accrue and compound interest daily and pay out monthly. And if you live in certain states - you could consider muni money market funds which can increase your tax equivalent yield because muni interest may be exempt from both state and federal taxes depending on the fund. You can also ladder into treasuries and be exempt from state taxes. tl;dr - there are more investing options in a brokerage account than a bank.

SullenLookingBurger

Was that a brokered CD or one opened directly with the bank?

eldowns

Generally speaking, nothing. That's great. If you have an HYS that's paying over 5% rn, please share. The only potential downside is that the interest rate is tied to the Fed, so if the Fed lowers interest rates (which is unlikely right now), your interest rate will drop with it shortly after. With a bond or CD, that rate is locked in for the duration of the note.

SirGlass

>You’d have to be a fool to leave banking right now, right? I mean if you have under 250k you have zero need to worry. However if you have some money you can invest for X months CD rates are very good

one8e4

If you can get 6%, stick to CD

r3dk0w

FDIC only protects the following account types (From [https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/](https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/)): Checking accounts Savings accounts Money market deposit accounts Certificates of deposit (CD) Prepaid cards (assuming certain FDIC requirements are met) ​ Investment products are typically not covered. If you have $250k in your checking or savings, the best path is to actually invest.

BuLLZ_3Y3

Maybe just stick with CD's from now on, hoss.

BossBackground104

Maybe laddered CD'S are for you.

Vast_Cricket

What is the bnak rating on Fortbright? Schawab Bank is unlikely to fail. Schwab brokerage has access to every CD that is on the market.

Vast_Cricket

People should keep their stocks in essential staple stocks, etfs not into growth stocks. One that I worry is volitale tech stocks. Tesla, Amazon, Meta etc. Park cash, CD, Treasury and precious metals to safeguard and avoid another 20-30 pct market correction. There is some signs that corp bonds have stabilized and may be used as hedging again. Better wait a little bit.

bob49877

You can spread your money around by buying Treasuries and FDIC insured broker CDs through different banks through one single brokerage account, like Fidelity or Schwab. The FDIC insurance is by the CD issuing bank, not the brokerage - "Because the deposits are obligations of the issuing bank, and not the brokerage firm, FDIC insurance applies.", https://www.fidelity.com/fixed-income-bonds/cds

rw4455

Why go with Schwab when Fortbright Bank is paying 5.25% on a 12 month CD. Fidelity also offers brokered CDs also paying 5.25% -all participating banks are FDIC insured, although Fidelity isn't a bank.

Turbulent-Peace861

I would sell half and put it in CD @ 5%. Wait for market to correct to enter again.

Clear-Ad9879

Meh. Doesn't matter what Buffett does. Assets gonna leave banks not because of fear but just because of disintermediation. Bank 3 mo CD deposit rate lags money market fund yield by 200-300 bps. Initially nobody paid attention because short duration savers had it ingrained in them that they got zero yield. But slowly they are relearning all the lessons of decades past and moving their funds to a better place. Deposit outflows are now occurring at large banks. it is inevitable.

SimpleLeaff

how is a brokered CD different than a regular CD?

Premier_Legacy

Bought a CD ladder today and not participating 

Operation_R45

Certainly. But referring to that level of return suggests investing in a short-term vehicle like a CD or the like. And you nailed the point. It's basically impossible to do safely, so do your best. Short term hopefully means just that.

Berkmy10

No margin interest is being charged. But a CD will reduce your buying power IF you wanted to use margin, or write puts, for instance.

Berkmy10

Not sure if it matters to you, but T-bills are 99% marginable. And CDs are 0% marginable. So a CD will reduce your margin buying power a lot more than T-bills would.

JeffB1517

CDs lag the market by about 45 days. So for example if the 5 year treasury was 3% 45 days ago and 3.2% today. If the bank's CD is 3.25% the best estimate for what it will be in 45 days is 3.45%. You get a "crystal ball" letting you look into future CD rates. It ain't 100% but it is very far from the 50/50 chances you face in the treasury market.