New PenFed CD rates!

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Kevin M
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Re: New PenFed CD rates!

Post by Kevin M »

VictoriaF wrote:You don't have a way back, and it's probably not all that bad. If the rates change in January and if Penfed does not grant you the December rates--you can complain, show a copy of your fax receipt as a proof, and quote what a CSR told you. Worse comes to worst, you can move the IRA money elsewhere leaving only $1k behind.
If PenFed won't honor the December rate if the rate goes down before funds arrive (and in my experience they won't, although I wouldn't be surprised if you complained enough, as Victoria suggests, you might get a different outcome), you can simply transfer the entire amount somewhere else if you can find a better rate. Since PenFed's EWP does not eat into principal, your only loss is the minimal interest you would have earned during the transfer processes.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Kevin M
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Re: New PenFed CD rates!

Post by Kevin M »

cpumechanic wrote:I see all the comments about moving IRA $ from Vanguard total bond market, or TIPs to Penfed, is there any reason to do one vs the other? As we all noticed the inflation protected bonds took a -7% hit this year.
Clearly the original TIPS fund (not the newer short-term TIPS fund) has more interest-rate risk than TBM, but TBM has more unexpected-inflation risk. Personally I no longer own any TIPS, but if I did I think I would follow Vanguard's lead and use the short-term TIPS fund, which they now are using in some of their Target Retirement funds. Even better are I Bonds, which give you a small real yield along with inflation protection with minimal interest-rate risk (limited to the EWP of 3 months of interest between years 1 and 5).

Personally, I would choose the PenFed 5-year CD earning 3% over any of the bond funds mentioned. You earn a higher rate than TBM with less risk. You get some inflation protection by being able to do an early withdrawal and reinvest at higher real rates with much less potential downside than the original TIPS fund.
cpumechanic wrote:Second question, if I have $10K to invest on Jan 1 2014 are the Penfed Bonds better than an I-bond?
It seems like yes since the I-bond rate is lower but... I would like others to confirm.
It depends on how much you think it's worth to pay for protection against unexpected inflation and on how much the tax-deferral of I Bonds is worth to you (assuming you would be owning the CDs in a taxable account). With new I Bonds earning 1.38% with the inflation component at 1.18%, and the PenFed 5-year CD earning about 3% you're paying about 1.6 percentage points for the inflation protection of an I Bond. Or if you want to use an expected inflation of say 2% over the next five years, then you're still paying about 1 percentage point for the inflation protection. Personally I think I'd go for the CD if it were one or the other, but if unsure, you could always do some of each.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
arcane23
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Re: New PenFed CD rates!

Post by arcane23 »

Most of my bond allocation sits in the Vanguard Intermediate Term Tax Exempt bond fund (Admiral). I expect to be in the 33% federal tax bracket with no state taxes. So my TE yield would be 3.67%. With PenFed 5 year CD, yield will be 2.03.

How many folks have moved funds from intermediate term tax exempt bond fund to the Pentagon Federal 5 year CD? I have seen some posts about moving funds to Limited Term TE bond fund (Admiral) to reduce duration (risk) but it yields 0.86%. Isn't the a PenFed CD a better option?
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HawaiiBrewer
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Re: New PenFed CD rates!

Post by HawaiiBrewer »

I'm maxed out with my IBonds for 2014 with $20k. I have $100k in Penfed 5 yr, 3% CD's now and plan to buy more when I get around to it on my days off from work. Seems you have to buy them via a phone call but it takes only a few minutes. The $25k max investment for "new" members is a drag but workable just creating more paper and records.

Aloha :beer
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Copper John
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Re: New PenFed CD rates!

Post by Copper John »

I have recently purchased $80K in non-IRA CDs and $250K in IRA CDs and thought I would clarify a few issues of the mechanics of this process. Funds for this purchase were transferred from my Vanguard & Fidelity accounts

Non-IRA CDs

I sold $80K in my Fidelity Brokerage account. I had these funds wire transferred to my Penfed core account. From this account I was able to purchase CDs online. There was not a $25K daily limit.

IRA CDs

Filled out form to open an account and designated Vanguard as the source of the funds. I specified Vanguard funds to sell on this form and did not have to place funds in a money market at Vanguard. This form was sent to Penfed which in turn sent it to Vanguard. Vanguard then cut a check and mailed this directly to Penfed. I had the funds placed in a core share account at PenFed. This entire process took about 2 weeks. I have the funds in a core account and I learned you can not buy CDS in an IRA account over the phone or online. You must mail or fax in a form to do this. I did this today. I could have designated CDs in the original form instead of having funds placed in a core account and this would have eliminated me having to submit a second form to transfer funds from the core account to purchase CDs.

There was not a $25K limit on the purchase of these CDs. BTW the rep on the phone told me the rates would hold until the end of January.
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Don Christy
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Re: New PenFed CD rates!

Post by Don Christy »

arcane23 wrote:Most of my bond allocation sits in the Vanguard Intermediate Term Tax Exempt bond fund (Admiral). I expect to be in the 33% federal tax bracket with no state taxes. So my TE yield would be 3.67%. With PenFed 5 year CD, yield will be 2.03.

How many folks have moved funds from intermediate term tax exempt bond fund to the Pentagon Federal 5 year CD? I have seen some posts about moving funds to Limited Term TE bond fund (Admiral) to reduce duration (risk) but it yields 0.86%. Isn't the a PenFed CD a better option?
I'm considering moving from Vanguard Int Term TE admiral to PenFed CD early in 2014. Lose a little on yield (but yield is pretty low anyway), and get rid of down-side duration risk. And I agree it's a much better option than Limited Term TE.
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Jonhello
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New PenFed CD rates good until the end of January

Post by Jonhello »

Just called Penfed this morning to ask some questions about setting up a Roth IRA with them. The CSR stated that they just got word that the CD rates are effective until the end of January. Anyone who calls in to Penfed can ask in order to confirm this.
furwut
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Re: New PenFed CD rates good until the end of January

Post by furwut »

Jonhello wrote:Just called Penfed this morning to ask some questions about setting up a Roth IRA with them. The CSR stated that they just got word that the CD rates are effective until the end of January. Anyone who calls in to Penfed can ask in order to confirm this.
Ditto. I called and got confirmation as well that the rate is good through end of January. So I've sent paperwork in to transfer an IRA to them.

If for some reason the rates ARE lowered one can revoke the the IRA CD:
ACCOUNT REVOCATION
Traditional/Roth. You may decide for any reason to revoke your Pentagon Federal IRA within 30 days of the date of establishment. Your request to revoke your account must be made in writing and should be sent to Pentagon Federal Credit Union, P.O. Box 1432, Attention: IRA Specialist, Alexandria, Virginia 22313‐ 2032. Upon receipt of your letter, Pentagon Federal will refund your contribution in full, neither crediting your account with earnings nor charging it with any adminis‐ trative fees. Revocation of your IRA is subject to reporting to the IRS. If you have any questions concerning your right to revoke your account, please call our IRA Specialist at 703‐838‐1247.
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Hayden
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Re: New PenFed CD rates!

Post by Hayden »

Copper John wrote:I have recently purchased $80K in non-IRA CDs and $250K in IRA CDs and thought I would clarify a few issues of the mechanics of this process. .
Copper John, thank you for this post.
How did you deal with the NCUA insurance limit of 250k?
Desert
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Re: New PenFed CD rates!

Post by Desert »

arcane23 wrote:Most of my bond allocation sits in the Vanguard Intermediate Term Tax Exempt bond fund (Admiral). I expect to be in the 33% federal tax bracket with no state taxes. So my TE yield would be 3.67%. With PenFed 5 year CD, yield will be 2.03.

How many folks have moved funds from intermediate term tax exempt bond fund to the Pentagon Federal 5 year CD? I have seen some posts about moving funds to Limited Term TE bond fund (Admiral) to reduce duration (risk) but it yields 0.86%. Isn't the a PenFed CD a better option?
I might be missing something, but the Vanguard Intermediate Term Tax Exempt bond fund has a current yield of 2.46%, which as you stated, is a TE yield of 3.67%. But the PenFed 5 year CD yield is 3.04%, and since it's taxable, it's TE yield is the same, 3.04%. So the Vanguard fund does have an advantage in yield over the CD, but it's only .63%.

Or comparing on an after-tax basis, the Vanguard fund has a yield of 2.46%, and the CD has a yield of 3.04*(1-.33) = 2.03. So the Vanguard fund has a 0.43% after-tax yield advantage. With an average duration of 5.5 years, the Vanguard fund obviously has a fair amount of interest rate risk. It's a tough call.
cpumechanic
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Re: New PenFed CD rates!

Post by cpumechanic »

Thanks to Kevin for his reply to my earlier question, now all I have to do is predict the future of inflation, and make my choice.
:happy

I like the flexibility of owning multiple $10K bonds at Penfed, and was a little taken aback that my "safe" Vanguard TIPS fund lost 7% this year even though the rates did not change all that much. Of course, as I have read here, a "wiff" of inflation and that fund will zoom upward again, and outperform the total bond fund.

Having a 50:50 asset allocation and the performance of the stock market this year, takes most of the "sting" away tho.

:sharebeer

Happy Holiday's to all.. and thanks again for the education on this stuff.

CPU
john94549
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Re: New PenFed CD rates!

Post by john94549 »

Inasmuch as our furnace died today, in a power surge, PenFed's rates are the least of my worries. We shall huddle around the gas-log fireplace.
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BrandonBogle
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Re: New PenFed CD rates!

Post by BrandonBogle »

john94549 wrote:Inasmuch as our furnace died today, in a power surge, PenFed's rates are the least of my worries. We shall huddle around the gas-log fireplace.
I had a whole house surge protector installed for $120 last year. Peace of mind when you consider the fridge, oven, washer, dryer (if electric), microwave, air conditioner, water heater (if electric), etc. all that typically do not have independent surge protectors on them. Worth the peace of mind for me!
island
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Re: New PenFed CD rates!

Post by island »

Recently opened the $5 savings account so we could purchase CDs and just completed 6 PenFed CDs, one a day to the max amount allowed.

Find it odd that DH and I couldn't create a joint account online or make the CDs joint holdings thru an online transaction.
We have to fax (or mail?) back a request to make the savings joint and mail back a form for each CD to make them joint holdings and/or to designate beneficiaries.
Surprised by that since it seems pretty archaic. Does anyone know if the snail mail requirements are typical of PenFed or does that ease up after you've been a member for awhile?

Thanks.
arcane23
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Re: New PenFed CD rates!

Post by arcane23 »

Desert wrote:
arcane23 wrote:Most of my bond allocation sits in the Vanguard Intermediate Term Tax Exempt bond fund (Admiral). I expect to be in the 33% federal tax bracket with no state taxes. So my TE yield would be 3.67%. With PenFed 5 year CD, yield will be 2.03.

How many folks have moved funds from intermediate term tax exempt bond fund to the Pentagon Federal 5 year CD? I have seen some posts about moving funds to Limited Term TE bond fund (Admiral) to reduce duration (risk) but it yields 0.86%. Isn't the a PenFed CD a better option?
I might be missing something, but the Vanguard Intermediate Term Tax Exempt bond fund has a current yield of 2.46%, which as you stated, is a TE yield of 3.67%. But the PenFed 5 year CD yield is 3.04%, and since it's taxable, it's TE yield is the same, 3.04%. So the Vanguard fund does have an advantage in yield over the CD, but it's only .63%.

Or comparing on an after-tax basis, the Vanguard fund has a yield of 2.46%, and the CD has a yield of 3.04*(1-.33) = 2.03. So the Vanguard fund has a 0.43% after-tax yield advantage. With an average duration of 5.5 years, the Vanguard fund obviously has a fair amount of interest rate risk. It's a tough call.
Yep, you are right. TE yield for PenFed stays the same as 3.04% if held for 5 years, thanks! I don't see myself holding the PenFed CDs for full 5 years if the interest rates go up. I plan to break the CD and roll it into a the CD with a newer better (hopefully) rate and build a ladder. So the TE yield for the CD could be 1.52% if broken after 2 years, 2.03% if broken after 3 years hence the gap between the bond fund yield and the CD will be wider. It is a tough call. Move money over to the CDs to eliminate risk or leave the funds in the bond funds and keep adding more as the bond prices go down with yield going up? Long term it might not make a difference since I am in accumulation phase.

I am thinking that I am going to just split my allocation 50/50. I have about $160K in the Vanguard fund, might leave half in there and keep on adding more with my biweekly contribution and the other half in CDs.
Desert
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Re: New PenFed CD rates!

Post by Desert »

arcane23 wrote: Yep, you are right. TE yield for PenFed stays the same as 3.04% if held for 5 years, thanks! I don't see myself holding the PenFed CDs for full 5 years if the interest rates go up. I plan to break the CD and roll it into a the CD with a newer better (hopefully) rate and build a ladder. So the TE yield for the CD could be 1.52% if broken after 2 years, 2.03% if broken after 3 years hence the gap between the bond fund yield and the CD will be wider. It is a tough call. Move money over to the CDs to eliminate risk or leave the funds in the bond funds and keep adding more as the bond prices go down with yield going up? Long term it might not make a difference since I am in accumulation phase.

I am thinking that I am going to just split my allocation 50/50. I have about $160K in the Vanguard fund, might leave half in there and keep on adding more with my biweekly contribution and the other half in CDs.
The simplicity of the bond fund is nice, especially for your ongoing contributions. Splitting half and half between the Vanguard IT Tax Exempt fund and the PenFed CD's sounds like a great idea.

Most of my bond money is in IRA's, and I haven't mustered the motivation to move IRA money to PenFed. But I'll be putting taxable money there as long as they have good rates available.
rj49
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Re: New PenFed CD rates!

Post by rj49 »

Desert wrote:
arcane23 wrote: Yep, you are right. TE yield for PenFed stays the same as 3.04% if held for 5 years, thanks! I don't see myself holding the PenFed CDs for full 5 years if the interest rates go up. I plan to break the CD and roll it into a the CD with a newer better (hopefully) rate and build a ladder. So the TE yield for the CD could be 1.52% if broken after 2 years, 2.03% if broken after 3 years hence the gap between the bond fund yield and the CD will be wider. It is a tough call. Move money over to the CDs to eliminate risk or leave the funds in the bond funds and keep adding more as the bond prices go down with yield going up? Long term it might not make a difference since I am in accumulation phase.

I am thinking that I am going to just split my allocation 50/50. I have about $160K in the Vanguard fund, might leave half in there and keep on adding more with my biweekly contribution and the other half in CDs.
The simplicity of the bond fund is nice, especially for your ongoing contributions. Splitting half and half between the Vanguard IT Tax Exempt fund and the PenFed CD's sounds like a great idea.

Most of my bond money is in IRA's, and I haven't mustered the motivation to move IRA money to PenFed. But I'll be putting taxable money there as long as they have good rates available.
At the same time, the bond fund could lose NAV value, especially with interest rates at historical lows. It depends on your comfort level, if you were disturbed by bond fluctuations last spring/summer or occasional media worries about failing cities/pension systems hurting the municipal bond market. Comparing a CD to a bond fund with fluctuating values is an apples to oranges thing, especially comparing yield...by that judgement, the Penfed CD would be equal to a high-dividend fund earning 3%, but of course the stock fund could easily lose 40% in a year, whereas the CD will never lose principal. But then desperate desire for yield is going to be a feature of investors for some time, I think. But not paying attention to the risk aspect of getting a higher yield is dangerous, I think.
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Re: New PenFed CD rates!

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BrandonBogle
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Re: New PenFed CD rates!

Post by BrandonBogle »

Interesting, my IRA CD has not required any after-the-fact signature. That said, I had to sign and fax in a form to open it, so that likely satisfied the signature requirement.
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HueyLD
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Re: New PenFed CD rates!

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BrandonBogle
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Re: New PenFed CD rates!

Post by BrandonBogle »

HueyLD wrote:
BrandonBogle wrote:Interesting, my IRA CD has not required any after-the-fact signature. That said, I had to sign and fax in a form to open it, so that likely satisfied the signature requirement.
With IRA's, you won't have a joint owner. In addition, you have already designated a beneficiary on the IRA app. form.
Sorry, I wasn't commenting on the joint ownership. I was commenting on people getting CD confirmations that they had to sign and return to PenFed. The IRA opening confirmation and the CD opening confirmation I received each were just statements for my records -- nothing to sign and return.
HueyLD wrote: No. You have to send back the signature form every time [snipped by BrandonBogle] Yes, it is pretty old fashioned, but we get better rates. :)
Copper John
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Re: New PenFed CD rates!

Post by Copper John »

Hayden wrote:
Copper John wrote:I have recently purchased $80K in non-IRA CDs and $250K in IRA CDs and thought I would clarify a few issues of the mechanics of this process. .
Copper John, thank you for this post.
How did you deal with the NCUA insurance limit of 250k?
Hayden - IRA accounts are treated as a separate account for insurance purposes. Per the NCUA:

"Retirement account insurance protection is separate and apart from insurance coverage on other credit union accounts. For example, if you have a regular share account, an IRA, and a KEOGH at the same credit union, the NCUSIF insures the regular share account for up to $250,000, the IRA for up to an additional $250,000, and the KEOGH for up to an additional $250,000."
lazyday
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Re: New PenFed CD rates!

Post by lazyday »

Kevin M wrote:, yet the FDIC considers them as the same ownership category. So apparently if you have a KEOGH you are better off at a credit union than a bank in terms of federal insurance coverage.
I've seen opinion before that NCUA and FDIC provide same coverage. Perhaps they do, or never did, or did until recent legislation.

NCUA.gov says "NCUA protects the money you have in a federally insured credit union up to $250,000, same as FDIC protects money in a bank account."
Doesn't say is identical, but unkind to use word "same" if they aren't identical in coverage.

Keogh's may have advantages and disadvantages vs IRAs vs 401k Solo. Not sure, but it might be possible to convert (or "rollover" or whatever) a Rollover IRA into a Keogh.
Pam01 wrote:http://www.ncua.gov/Legal/GuidesEtc/Gui ... nsured.pdf

"For example, if you have a regular share account, an IRA, and a KEOGH at the same credit union, the NCUSIF insures the regular share account for up to $250,000, the IRA for up to an additional $250,000, and the KEOGH for up to an additional $250,000."
The "you" in above quote (center of 2nd page) implies to me that a Keogh for a sole proprietorship should be covered separately from IRA category.
LadyGeek wrote:For the NCUA: E-Calculator
There is a warning here it "bases the computations for coverage on the rules in effect as of October 3, 2008. If any subsequent statutory or regulatory changes should occur, NCUA will update the calculator as quickly as possible."
So hopefully up to date, but who knows.

If you choose "Business Account" you are asked if is a sole proprietorship. If so, are redirected to personal account. If try "other" for Keogh, told "E-Calculator can only calculate the insurance coverage of single accounts, joint accounts, ITF/POD accounts, living trust accounts, and IRAs."

I've some interest in free or cheap insurance like FDIC, NCUA, SIPC, but again, the $250,000 limit isn't my problem, so not willing to spend much effort finding the facts.
If anyone finds more or better info, please post here and/or PM me.
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dm200
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Re: New PenFed CD rates!

Post by dm200 »

lazyday wrote:
Kevin M wrote:, yet the FDIC considers them as the same ownership category. So apparently if you have a KEOGH you are better off at a credit union than a bank in terms of federal insurance coverage.
I've seen opinion before that NCUA and FDIC provide same coverage. Perhaps they do, or never did, or did until recent legislation.

NCUA.gov says "NCUA protects the money you have in a federally insured credit union up to $250,000, same as FDIC protects money in a bank account."
Doesn't say is identical, but unkind to use word "same" if they aren't identical in coverage.

Keogh's may have advantages and disadvantages vs IRAs vs 401k Solo. Not sure, but it might be possible to convert (or "rollover" or whatever) a Rollover IRA into a Keogh.
Pam01 wrote:http://www.ncua.gov/Legal/GuidesEtc/Gui ... nsured.pdf

"For example, if you have a regular share account, an IRA, and a KEOGH at the same credit union, the NCUSIF insures the regular share account for up to $250,000, the IRA for up to an additional $250,000, and the KEOGH for up to an additional $250,000."
The "you" in above quote (center of 2nd page) implies to me that a Keogh for a sole proprietorship should be covered separately from IRA category.
LadyGeek wrote:For the NCUA: E-Calculator
There is a warning here it "bases the computations for coverage on the rules in effect as of October 3, 2008. If any subsequent statutory or regulatory changes should occur, NCUA will update the calculator as quickly as possible."
So hopefully up to date, but who knows.

If you choose "Business Account" you are asked if is a sole proprietorship. If so, are redirected to personal account. If try "other" for Keogh, told "E-Calculator can only calculate the insurance coverage of single accounts, joint accounts, ITF/POD accounts, living trust accounts, and IRAs."

I've some interest in free or cheap insurance like FDIC, NCUA, SIPC, but again, the $250,000 limit isn't my problem, so not willing to spend much effort finding the facts.
If anyone finds more or better info, please post here and/or PM me.
FDIC (for banks) and NCUA (for credit unions) currently provide the same limits and backing. it is, I suppose, not "identical" because it is administered by a different federal government agency. The limits ($250,000) are the same, as are the ways of being covered for more than the $250,000. I am quite sure there have been no recent changes that make FDIC and NCUA coverage different. Occasionally, when laws/regulations change, there may be a short period when the coverage might differ between banks and credit unions - but, as far as I know, all changes to limits, etc. in many years have been applied to both. There may be some kinds of accounts (probably not widespread or common) that banks may be able to offer that credit unions may not be able to offer - due to different laws/regulations in effect.
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Kevin M
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Re: New PenFed CD rates!

Post by Kevin M »

dm200 wrote: FDIC (for banks) and NCUA (for credit unions) currently provide the same limits and backing. it is, I suppose, not "identical" because it is administered by a different federal government agency. The limits ($250,000) are the same, as are the ways of being covered for more than the $250,000. I am quite sure there have been no recent changes that make FDIC and NCUA coverage different.
I always assumed they were the same too, but if you read the verbiage on the FDIC and NCUA sites, it's quite clear that KEOGH accounts are treated differently. FDIC aggregates them along with IRA and other self-directed retirement accounts, NCUA aggregates KEOGHs and IRAs separately. It could be that the verbiage is incorrect on one site or the other. I thought that might be the case for the NCUA coverage brochure that was first quoted in this thread, but I found essentially the same IRA/KEOGH coverage descriptions in a few different places on the NCUA web sites.
dm200 wrote:There may be some kinds of accounts (probably not widespread or common) that banks may be able to offer that credit unions may not be able to offer - due to different laws/regulations in effect.
But that's not the point of difference that's been raised here--it's KEOGH accounts, which are explicitly covered by both banks and CUs.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
learning_head
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Re: New PenFed CD rates!

Post by learning_head »

I don't have references handy but I did look into FDIC And NCUA coverages in the past and one (I thought important) difference was in the question related to POD account titling. FDIC had specific instructions that to consider POD accounts as separate category (from individual), you must have had Account Title setup in special way with some special language they require. So in other words, it's NOT sufficient for account to be POD to a qualified individual, but account title MUST contain the special language. Further, many banks did NOT / do NOT have the correct titling for POD accounts to consider them a separate category than individual coverage for FDIC purposes, and one has to be careful about this point as bringing it up with first line of CSRs at a bank will definitely get you nowhere.

NCUA does not appear to have this account titling requirement.
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Kevin M
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Re: New PenFed CD rates!

Post by Kevin M »

learning_head wrote:I don't have references handy but I did look into FDIC And NCUA coverages in the past and one (I thought important) difference was in the question related to POD account titling. FDIC had specific instructions that to consider POD accounts as separate category (from individual), you must have had Account Title setup in special way with some special language they require. So in other words, it's NOT sufficient for account to be POD to a qualified individual, but account title MUST contain the special language. Further, many banks did NOT / do NOT have the correct titling for POD accounts to consider them a separate category than individual coverage for FDIC purposes, and one has to be careful about this point as bringing it up with first line of CSRs at a bank will definitely get you nowhere.

NCUA does not appear to have this account titling requirement.
I assume this is what you're referring to (source is FDIC: Your Insured Deposits):
The account title at the bank must indicate that the account is held pursuant to a trust relationship. This rule can be met by using the terms payable on death (or POD), in trust for (or ITF), as trustee for (or ATF), living trust, family trust, or any similar language, including simply having the word “trust” in the account title. Account title includes information contained in the bank’s electronic deposit account records.
So the titling requirement is not complicated--as long as "POD" (or any of the other terms above or "any similar language") is included in the account title, that part of the requirement is met.

Ally Bank originally did not include this in the title of the accounts for which I had designated POD beneficiaries. Although I assumed that the designation of beneficiaries in "the bank's electronic deposit account records" per the last sentence met the requirement, to be safe (after this was brought up here a couple of years ago), I called and asked them to include the POD reference in the account titles. This was done on all accounts after the one phone call to the "first line CSR". They actually added "POD <beneficiary name>" for each beneficiary to each POD account name. I can see this online, as well as in my statements.

I wonder how accurate these consumer-oriented web pages and pamphlets are. It would be interesting if someone actually dug into the regulations themselves to verify these differences.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: New PenFed CD rates!

Post by marcos123 »

Kevin M wrote:
I wonder how accurate these consumer-oriented web pages and pamphlets are. It would be interesting if someone actually dug into the regulations themselves to verify these differences.
Kevin:

Ask and you shall receive. Have benefited from your posts here and pleased to finally give back! Here is the link to the related regulations, specifically, 12 C.F.R. 330.10 (b):

http://www.fdic.gov/regulations/laws/ru ... part330.10

It reads as follows:

(b) Required intention and naming of beneficiaries. (1) The required intention in paragraph (a) of this section that upon the owner's death the funds shall belong to one or more beneficiaries must be manifested in the "title" of the account using commonly accepted terms such as, but not limited to, "in trust for," "as trustee for," "payable-on-death to," or any acronym therefore. For purposes of this requirement, "title" includes the electronic deposit account records of the institution. (For example, the FDIC would recognize an account as a revocable trust account even if the title of the account signature card does not designate the account as a revocable trust account as long as the institution's electronic deposit account records identify (through a code or otherwise) the account as a revocable trust account.) The settlor of a revocable trust shall be presumed to own the funds deposited into the account.
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Kevin M
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Re: New PenFed CD rates!

Post by Kevin M »

marcos123 wrote: Kevin:

Ask and you shall receive. Have benefited from your posts here and pleased to finally give back! Here is the link to the related regulations, specifically, 12 C.F.R. 330.10 (b):

http://www.fdic.gov/regulations/laws/ru ... part330.10
Thanks Marcos. To compare and see if the apparent differences between FDIC and NCUA are supported by the regulations, we need to see the regulations applicable to NCUA too. I did a quick search and didn't find them.
marcos123 wrote: (b) Required intention and naming of beneficiaries. (1) The required intention in paragraph (a) of this section that upon the owner's death the funds shall belong to one or more beneficiaries must be manifested in the "title" of the account using commonly accepted terms such as, but not limited to, "in trust for," "as trustee for," "payable-on-death to," or any acronym therefore. For purposes of this requirement, "title" includes the electronic deposit account records of the institution. (For example, the FDIC would recognize an account as a revocable trust account even if the title of the account signature card does not designate the account as a revocable trust account as long as the institution's electronic deposit account records identify (through a code or otherwise) the account as a revocable trust account.) The settlor of a revocable trust shall be presumed to own the funds deposited into the account.
The thing that concerns me is that I don't know if the way Ally Bank, for example, is coding its electronic deposit account records would satisfy the FDIC, although I think it would. I feel better seeing "POD" directly in the account titles.

Note that PenFed does not indicate "POD" in its account titles for POD accounts (although the point was made that NCUA's requirements are not as strict about this). Not only that, but I can't even find the beneficiary designations anywhere on the website for my POD or IRA accounts there. In my PenFed statements, only one IRA account lists one beneficiary (it should list four), and none of my POD accounts indicate POD or list the beneficiaries. I'm pretty sure I've verified the IRA beneficiaries with PenFed in the past, but will be calling them soon to straighten this out. I need to call them anyway because on one of my new POD CDs, the form they sent me lists only two beneficiaries although I entered three online when I opened the CD.

Thanks,

Kevin
If I make a calculation error, #Cruncher probably will let me know.
marcos123
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Re: New PenFed CD rates!

Post by marcos123 »

Kevin M wrote:
marcos123 wrote: Kevin:

Ask and you shall receive. Have benefited from your posts here and pleased to finally give back! Here is the link to the related regulations, specifically, 12 C.F.R. 330.10 (b):

http://www.fdic.gov/regulations/laws/ru ... part330.10
Thanks Marcos. To compare and see if the apparent differences between FDIC and NCUA are supported by the regulations, we need to see the regulations applicable to NCUA too. I did a quick search and didn't find them.
Kevin:

OK, got it .... hope this helps! From 12 CFR 745.4 (b):

http://www.law.cornell.edu/cfr/text/12/745.4

(b) Required intention and naming of beneficiaries. The required intention in paragraph (a) of this section that upon the owner's death the funds shall belong to one or more beneficiaries must be manifested in the title of the account or elsewhere in the account records of the credit union using commonly accepted terms such as, but not limited to, in trust for, as trustee for, payable-on-death to, or any acronym therefore, or by listing one or more beneficiaries in the account records of the credit union. In addition, for informal revocable trust accounts, the beneficiaries must be specifically named in the account records of the insured credit union. The settlor of a revocable trust shall be presumed to own the funds deposited into the account.

Looking forward to your take on this.

Cheers, Marcos
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Re: New PenFed CD rates!

Post by marcos123 »

Kevin M wrote:
The thing that concerns me is that I don't know if the way Ally Bank, for example, is coding its electronic deposit account records would satisfy the FDIC, although I think it would. I feel better seeing "POD" directly in the account titles.
The CDs that I have held over at Ally are clearly titled in my name ITF a Revocable Trust that I set up, the wording of which is visible both online and in the account statements.

I set it up this way as the alternative of setting up a formal Trust Account - at least from what I understood from the CSR- would actually prevent online access to this account. Is that your understanding as well? That would, to say the least, present an operational and control issue given my overseas location.
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Re: New PenFed CD rates!

Post by Kevin M »

marcos123 wrote: OK, got it .... hope this helps! From 12 CFR 745.4 (b):

http://www.law.cornell.edu/cfr/text/12/745.4
Excellent! It certainly seems that the intent basically is the same with FDIC and NCUA, but the NCUA language does seem to explicitly provide more flexibility; i.e., you're OK as long as the beneficiaries are listed in the account records, which by definition they must be for POD accounts.

Thanks Marco,

Kevin
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Re: New PenFed CD rates!

Post by Kevin M »

marcos123 wrote: The CDs that I have held over at Ally are clearly titled in my name ITF a Revocable Trust that I set up, the wording of which is visible both online and in the account statements.

I set it up this way as the alternative of setting up a formal Trust Account - at least from what I understood from the CSR- would actually prevent online access to this account. Is that your understanding as well? That would, to say the least, present an operational and control issue given my overseas location.
An Ally CSR recommended that to my Mom as well (or making it POD to the trust), but after researching the California probate laws a bit with respect to this, I recommended against it. As the successor trustee of her trust, and having settled a couple of trusts in the past, I was uncomfortable with the additional complexities this could cause. The main benefit of POD (or in Ally's case, also ITF) is that on death the assets can be distributed directly to the beneficiaries with no need to even set up a formal trust, so having the trust be the beneficiary of POD or ITF accounts seemed overly complex to me. So I would make sure that your successor trustee would have no problems settling this part of the trust.

I have Ally accounts (savings and at least one CD) held in my living trust, and other accounts (checking, savings and most of my CDs) held as POD. I can work online with the trust savings account the same way I work with the POD savings account: I see the account (and trust CDs) online, I can view transaction history online, and I can perform ACH transfers and transfers between the formal trust and POD Ally accounts. So in my experience, what the CSR told you is not completely correct.

However Ally insists on sending me paper statements for the trust accounts, and does include these accounts in the consolidated online statement.

Also, you cannot open a CD online within a formal trust--you must do it by phone--which is why I switched over to using POD accounts. Since my trust is simple, POD works for me.

So, in my experience the only downside of formal trust accounts at Ally, once opened, is that they provide only paper statements.

Kevin
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Re: New PenFed CD rates!

Post by marcos123 »

Thanks Kevin .... your clarification,as well as the information on the in's and out's of formal trust accounts at Ally, is very helpful. In an (often unsuccessful) attempt to limit incoming mail to my US-based mailbox, that physical statement, as well as the inability you cite of setting up CDs online, is a deal-breaker.

A principal reason for the formal trust structure: so that my US-based successor trustee would easily be able to get funds over to my foreign beneficiary (in this case via wire transfer). The operational alternative for nearly all banks, from what I researched, in a simple POD would have to be a check cut out and mailed to the beneficiary. Is that your understanding as well? In the case of a foreign beneficiary, that could raise major control issues in terms of receipt of that check, and then collection issues (potential discounting, and foreign exchange) in cashing it in and depositing with his local bank. I couldn't figure out a better operational alternative to the revocable trust to get these funds to the beneficiary, but especially seeing that you have successor trustee experience, I would certainly be very interested in any suggestions you might have!

Marcos
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Re: New PenFed CD rates!

Post by Kevin M »

Marcos, I think we've drifted too far off topic for this thread. I'll PM you unless you want to start a new thread for this topic.

Kevin
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Re: New PenFed CD rates!

Post by Nahum »

Just got a couple of PenFed CD's. 3% is the best deal I have seen in years. I bought some yesterday because I was afraid it would end today. If I remember correctly the person I talked to told me PenFed will continue to offer 3% 5yr CD until the end of January.
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Re: New PenFed CD rates!

Post by LadyGeek »

You made me check: Certificates Overview - PenFed (Click on the rates tab).

The 7-year rate is the same as the 5-year rate (APY = 3.04%), so there's no incentive to go beyond 5 years. I have the 7-year product, so I'll keep an eye on it.
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Re: New PenFed CD rates!

Post by david99 »

I was told by a Pen Fed customer service rep that the 3%, 5 year CD would be extended until the end of January. I got a 3% five year CD in December and I plan to get another one in January. There doesn't seem to be any point in getting a 7 year CD since rates are low and will probably go up.

Happy New Year!
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Re: New PenFed CD rates!

Post by BrandonBogle »

People made the same argument for not going too long when PenFed was offering 6%+ CDs. I got a 3, a 4, and a 5 year CD then. Wish I got a 7-year then too!

This time around though I only got 5 year CDs.
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Re: New PenFed CD rates!

Post by lazyday »

Could make arguments either way. Most seem to think 5 is better, and I suppose 5 vs 7 year treasuries would show the 5yr CD a better deal.

But I see the midsized penalty for early withdrawal as a big benefit, lowering the risk of extending duration. Perhaps enough that reinvestment risk is a greater concern.
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Re: New PenFed CD rates!

Post by Kevin M »

lazyday wrote:Could make arguments either way. Most seem to think 5 is better, and I suppose 5 vs 7 year treasuries would show the 5yr CD a better deal.
Correct. 5-year treasury yield is 1.75%, 7-year is 2.45%, so you're getting a much larger premium on the 5-year CD.
lazyday wrote:But I see the midsized penalty for early withdrawal as a big benefit, lowering the risk of extending duration.
Another good observation. Breaking the 5-year or 7-year CD in less than 5 years will incur the same penalty, but of course at 5 years you get to roll over the 5-year CD penalty free, so going with the 7-year is making a bet on relatively low rates for more than five years. I stuck with the 5-year. The positive treasury yield curve between five and seven years indicates that investors are demanding a premium for extending duration in that range, but the 7-year CD doesn't provide any premium.

Kevin
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Carl53
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Re: New PenFed CD rates!

Post by Carl53 »

PF updated their website to confirm the extension through January.

https://www.penfed.org/Money-Market-Cer ... WT.ac=1232
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Re: New PenFed CD rates!

Post by Blues »

Carl53 wrote:PF updated their website to confirm the extension through January.

https://www.penfed.org/Money-Market-Cer ... WT.ac=1232
Well, kinda sorta...
Details and Disclosures

Annual Percentage Yield (APY) is accurate as of January 01, 2014 - January 31, 2014 and is subject to change at any time.
We will establish your certificate on the day we receive your application and funding. Once purchased, the rate is locked in for the term of your certificate.
Still mulling this over. I might have opened an account already if the site hadn't advised that I handle the application process by phone.
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Re: New PenFed CD rates!

Post by cheapedy »

Sounds like a good option to get something from the $2,000 I have parked in a Chase checking account. Can I transfer that money to a chase savings account, then ACH to PenFed CD or does it have to be checking? Want to avoid those sneaky Chase fees.
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Re: New PenFed CD rates!

Post by tbradnc »

cheapedy wrote:Sounds like a good option to get something from the $2,000 I have parked in a Chase checking account. Can I transfer that money to a chase savings account, then ACH to PenFed CD or does it have to be checking? Want to avoid those sneaky Chase fees.
Easier than that if you're already a member. Just navigate to the page on the PenFed site that lists the certificate rates and click the "Open Now" button. If you don't have enough in your PenFed share account to purchase a certificate you only have the option of moving the money via ACH from an outside institution.

I have $15.15 in my PenFed share account and purchased certificates pulling the money from Ally.
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Re: New PenFed CD rates!

Post by cdogg44 »

I have been eyeing these rates for the last two weeks but I am still unsure if I will bite. I have been a Penfed customer for nearly two years but quit using their Platinum Rewards credit card this past fall after they changed the redemption rates for cash cards. I might still be a little upset...

I am looking at the 5yr CD, but am curious about bailing early in search of rising rates. Does breaking a CD affect my credit?

Is there any type of online calculator that would determine (including the penalty) which CD would be the best option if I broke at 2, 3, 4, or 5 years? Also taking into account the different rates of the 2, 3, 4, and 5 year CD options. Am I over thinking this?

Thanks
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Re: New PenFed CD rates!

Post by matjen »

cdogg44 wrote:I have been eyeing these rates for the last two weeks but I am still unsure if I will bite. I have been a Penfed customer for nearly two years but quit using their Platinum Rewards credit card this past fall after they changed the redemption rates for cash cards. I might still be a little upset...

I am looking at the 5yr CD, but am curious about bailing early in search of rising rates. Does breaking a CD affect my credit?

Is there any type of online calculator that would determine (including the penalty) which CD would be the best option if I broke at 2, 3, 4, or 5 years? Also taking into account the different rates of the 2, 3, 4, and 5 year CD options. Am I over thinking this?

Thanks

I suggest you read the entire thread and you will find the info. There might be some corrections to this later but early on Victoria had a nice post with the info you seek:


"6 Month 0.300% 0.30%
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%

For those planning to hold the CDs for 2 years, the effective rates are as follows:

- Get a 2-year CD and keep it for 2 years, get 1.41% per year.
- Get a 3-year CD and keep it for 2 years, lose 0.5 year of interest, which is 1.01% and get 1.5 years of interest, or 3.03%, or 1.52% per year.
- Get a 4-year CD and keep it for 2 years, lose 0.5 year of interest, which is 1.11% and get 1.5 years of interest, or 3.33%, which is about 1.67% per year.

For those planning to hold the CDs for 3 years, the effective rates are as follows:

- Get a 3-year CD and keep it for 3 years, get 2.02% per year.
- Get a 4-year CD and keep it for 3 years, lose 0.5 year of interest, which is 1.11% and get 2.5 years of interest, or 5.55%, which is about 1.85% per year.

Thus, the 4-year CD wins for the 2-year and 4-year holding periods, and the 3-year CD wins for the 3-year holding period.

Victoria"
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Re: New PenFed CD rates!

Post by LadyGeek »

cdogg44 wrote:...Is there any type of online calculator that would determine (including the penalty) which CD would be the best option if I broke at 2, 3, 4, or 5 years?
You can do it yourself with the spreadsheet in the wiki: Comparing CDs
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Re: New PenFed CD rates!

Post by cdogg44 »

Thank you both for the replies. That ws exactly what I was looking for.

One last thing, does breaking a CD in any way affect your credit? I assume it wouldn't but would like to know for sure.

Thanks
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Re: New PenFed CD rates!

Post by LadyGeek »

No, it's an internal transaction between you and the bank.

^^^ Actually, I've never thought about it but that seems like the right answer. IRS, yes (paid interest). Credit agency, no.
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