When the yield on a CD with a lower early withdrawal penalty is meaningfully lower, go for the CD with a higher yield even though the early withdrawal penalty is larger.
Ally Bank Now Requires Consent Before Allowing Early Withdrawal From a CD
Hat tip to Bogleheads investment forum participant B’Falls_JT, I learned that Ally Bank now requires its consent before it will allow early withdrawal from a CD. The early withdrawal penalty doesn’t even come into play if the bank doesn’t agree to the early withdrawal in the first place. Many people advocated buying a 5-year CD […]
EE Bonds vs CDs and Bond Funds For Long-Term Investment
It’s often said that one’s ability to delay gratification is an important factor of success in personal finance. When you don’t buy that new whatever until you have enough money to pay for it, you save on interest you would otherwise pay. When you save a portion of your current pay for retirement, you are […]
5 Stages of Grief and Low Interest Rates
I heard about the five stages of grief but I hadn’t really looked into it. When I read about it on Wikipedia, I thought the model fits very well how savers grieve about low interest rates. Denial "Rates have nowhere to go but up." "The Fed only controls short term rates. Low short term rates […]
What Would Happen When Interest Rates Go Up
By now you probably heard that bonds, and in particular long-term US Treasury bonds, did the best in 2011 among all major asset classes. Here are the performances of select Vanguard mutual funds in 2011: Vanguard Long-Term Treasury Fund (VUSTX) +29.28% Vanguard Long-Term Bond Index Fund (VBLTX) +22.06% Vanguard Long-Term Investment-Grade Fund (VWESX) +17.18% Vanguard […]
Banks Automatically Renew Matured CDs
I first heard this from Jonathan at My Money Blog about two years ago. Many banks automatically renew matured CDs to the same term. You only have a very short window — a few days — to stop that. If you miss the window, you are subject to the early withdrawal penalty on the new […]
Fort Knox Federal Credit Union Changes Terms On Existing CDs
This is not an April Fool’s joke. Ken at DepositAccounts.com reported yesterday that a credit union in Kentucky is reneging the terms on its existing CDs. Fort Knox Federal Credit Union told customers the early withdrawal penalty on their CDs will go up from 3 months to 6 months. The change affects not only new […]
Brokered CD and Bank Failures
I wondered how long that 0-star R-G Premier Bank of Puerto Rico would last (see previous post Treasure Hunting in Secondary CDs). Now I know the answer: six months. Last week, the regulators closed R-G Premier Bank of Puerto Rico together with two other banks in Puerto Rico, Westernbank and Eurobank. Before they were closed, […]
Treasure Hunting in Secondary CDs
I mentioned in a previous post Short-Term Fixed Income: CDs vs Bond Funds that I would buy CDs as short-term fixed income investment for my solo 401(k) account. Because Fidelity administers my solo 401(k) plan, I can buy only what’s available through Fidelity. I looked at new-issue brokered CDs. The yields are lower than the […]
Short-Term Fixed Income: CDs vs Bond Funds
The interest rates are really low these days. If you are trying to rollover a matured CD or if you want to save for something you need in a few years, it’s not easy to find a good option. After rolling over my IRA to my solo 401k at Fidelity, I want invest a small […]