CD Choice

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Topic Author
sport
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CD Choice

Post by sport »

I am planning on buying a 2-year brokered CD at Vanguard to fill a rung in my CD ladder. The two best choices are:
1. 1.00% payable monthly, callable each month beginning May 2022.
2. 0.90% payable semiannually.

Which would you recommend I choose?
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dm200
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Re: CD Choice

Post by dm200 »

sport wrote: Mon Jan 24, 2022 2:39 pm I am planning on buying a 2-year brokered CD at Vanguard to fill a rung in my CD ladder. The two best choices are:
1. 1.00% payable monthly, callable each month beginning May 2022.
2. 0.90% payable semiannually.

Which would you recommend I choose?
I would choose 2 because 1 can be called.
Topic Author
sport
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Re: CD Choice

Post by sport »

dm200 wrote: Mon Jan 24, 2022 2:54 pm
sport wrote: Mon Jan 24, 2022 2:39 pm I am planning on buying a 2-year brokered CD at Vanguard to fill a rung in my CD ladder. The two best choices are:
1. 1.00% payable monthly, callable each month beginning May 2022.
2. 0.90% payable semiannually.

Which would you recommend I choose?
I would choose 2 because 1 can be called.
With the Fed promising rate increases over the next 2 or 3 years, is that likely?
50/50
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Re: CD Choice

Post by 50/50 »

Would a 15 month CD @ 1% APY at Penfed FCU work for you?
Thou shalt take no risks that thou needest not take. Seek wisdom not knowledge. Knowledge is of the past; wisdom is of the future.
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sport
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Re: CD Choice

Post by sport »

50/50 wrote: Mon Jan 24, 2022 4:51 pm Would a 15 month CD @ 1% APY at Penfed FCU work for you?
Thanks for the suggestion. The rate is good. However, I am in the process of simplifying my holdings to make things easy for those who will take care of them when I am no longer able to do so. So, I have settled on brokered CDs at Vanguard and that keeps all of them in one place. It also eliminates the CDs that automatically renew at low rates.
HappyPappy
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Re: CD Choice

Post by HappyPappy »

sport wrote: Mon Jan 24, 2022 2:39 pm I am planning on buying a 2-year brokered CD at Vanguard to fill a rung in my CD ladder. The two best choices are:
1. 1.00% payable monthly, callable each month beginning May 2022.
2. 0.90% payable semiannually.

Which would you recommend I choose?
I’d choose #1 because rates will be higher so . . . The bond issuer is unlikely to call the bond in order to “refinance” for a lower rate. Both numbers are the APY?

How much does Vanguard charge, if anything, for the transaction?

I have a CD ladder with 3-month rungs and it’s a pain to maintain. I keep them all at ETrade. I haven’t looked, for some bonds/CDs, the fee ETrade charges is more than the interest I’d earn. I don’t buy those. :/

Does Vanguard have a good tool for finding CDs and a good selection?
Rudedog
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Re: CD Choice

Post by Rudedog »

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Topic Author
sport
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Re: CD Choice

Post by sport »

HappyPappy wrote: Mon Jan 24, 2022 5:19 pm How much does Vanguard charge, if anything, for the transaction?

I have a CD ladder with 3-month rungs and it’s a pain to maintain. I keep them all at ETrade. I haven’t looked, for some bonds/CDs, the fee ETrade charges is more than the interest I’d earn. I don’t buy those. :/

Does Vanguard have a good tool for finding CDs and a good selection?
For original issue CDs, there is no charge. They are only sold in $1000 increments.
The selection tool is easy. Just click on "what we offer" and select CDs. The selection is variable, depending on what the banks are offering.
HappyPappy
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Re: CD Choice

Post by HappyPappy »

sport wrote: Mon Jan 24, 2022 6:03 pm
HappyPappy wrote: Mon Jan 24, 2022 5:19 pm How much does Vanguard charge, if anything, for the transaction?

I have a CD ladder with 3-month rungs and it’s a pain to maintain. I keep them all at ETrade. I haven’t looked, for some bonds/CDs, the fee ETrade charges is more than the interest I’d earn. I don’t buy those. :/

Does Vanguard have a good tool for finding CDs and a good selection?
For original issue CDs, there is no charge. They are only sold in $1000 increments.
The selection tool is easy. Just click on "what we offer" and select CDs. The selection is variable, depending on what the banks are offering.
That sounds about the same as ETrade. Etrade charges nothing to purchase new offers but anything on the secondary market and I have to pay a commission. Some of the offerings have minimums higher than $1,000, most are probably $1,000.
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indexfundfan
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Re: CD Choice

Post by indexfundfan »

The 2-yr treasury is also around 1.0%, non-callable and is state-tax free. It is also very liquid (in case you need to sell) compared to brokered CDs and you can purchase it from Vanguard.

PS. Unfortunately, you just missed the auction today. The next auction is on 2/22. Or you can try the secondary market. It seems like Vanguard no longer charge a fee for secondary market treasury trades.
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tomsense76
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Re: CD Choice

Post by tomsense76 »

Would actually suggest some other strategies given what is out there compared to CDs.

First put the money in I Bonds. There is a $10k/person limit and $5k/tax return. So $25k/married couple if using MFJ. This is locked up for 1yr, but actually pays the rate of inflation unlike with a CD, which is far below. There is an early withdrawal penalty if the money is cashed out within the first 5yrs, but this is only 3mos of interest, which one still likely comes ahead of a CD even with this.

Second invest the money in stocks in taxable and rebalance in your 401k to move an equivalent amount of funds in stable value using this strategy. Not only will the rate likely be higher, but it will be in tax advantaged account where tax drag is not an issue. The stocks in taxable will have some tax drag, but this is pretty small as it will only be on the dividends. When you do sell, there could be capital losses, which would be helpful for taxes as opposed to harmful like interest (admittedly with paltry rates it probably doesn't matter much anyways).
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Topic Author
sport
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Re: CD Choice

Post by sport »

tomsense76 wrote: Mon Jan 24, 2022 7:45 pm Would actually suggest some other strategies given what is out there compared to CDs.
Thanks for the suggestions. I have other investments, both fixed income and equity, but I choose to have an allocation to CDs as well. It's a diversification thing.
mary1492
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Re: CD Choice

Post by mary1492 »

xyzzy
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UpperNwGuy
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Re: CD Choice

Post by UpperNwGuy »

sport wrote: Mon Jan 24, 2022 4:59 pm
50/50 wrote: Mon Jan 24, 2022 4:51 pm Would a 15 month CD @ 1% APY at Penfed FCU work for you?
Thanks for the suggestion. The rate is good. However, I am in the process of simplifying my holdings to make things easy for those who will take care of them when I am no longer able to do so. So, I have settled on brokered CDs at Vanguard and that keeps all of them in one place. It also eliminates the CDs that automatically renew at low rates.
Are you suggesting that PenFed automatically renews its CDs at low rates? That hasn't been my experience.
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sport
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Re: CD Choice

Post by sport »

UpperNwGuy wrote: Mon Jan 24, 2022 8:28 pm
sport wrote: Mon Jan 24, 2022 4:59 pm
50/50 wrote: Mon Jan 24, 2022 4:51 pm Would a 15 month CD @ 1% APY at Penfed FCU work for you?
Thanks for the suggestion. The rate is good. However, I am in the process of simplifying my holdings to make things easy for those who will take care of them when I am no longer able to do so. So, I have settled on brokered CDs at Vanguard and that keeps all of them in one place. It also eliminates the CDs that automatically renew at low rates.
Are you suggesting that PenFed automatically renews its CDs at low rates? That hasn't been my experience.
I am not suggesting anything about PenFed. I have never dealt with them and know nothing about them. I do have experience with other providers.
50/50
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Re: CD Choice

Post by 50/50 »

sport wrote: Mon Jan 24, 2022 4:59 pm
50/50 wrote: Mon Jan 24, 2022 4:51 pm Would a 15 month CD @ 1% APY at Penfed FCU work for you?
Thanks for the suggestion. The rate is good. However, I am in the process of simplifying my holdings to make things easy for those who will take care of them when I am no longer able to do so. So, I have settled on brokered CDs at Vanguard and that keeps all of them in one place. It also eliminates the CDs that automatically renew at low rates.
Yeah, I keep getting the urge to go all in with brokered CDs but when I try it along comes one of those pesky cd "specials" and I just can't seem to resist going for it.

I do use a brokerage account to add CDs and occasionally treasuries to fill in gaps in my CD ladder when it gets messed up.

I think you have a good plan. Stick to it.
Thou shalt take no risks that thou needest not take. Seek wisdom not knowledge. Knowledge is of the past; wisdom is of the future.
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