Best Bank Account Interest Rates - Summary for January 2, 2011
Happy New Year! 2010 was another tough year for savers. The Fed has now held the target Fed funds rate at near zero for over 2 years. As a comparison to the recession back in 2001 and 2002, the Fed funds rate bottomed out at 1.00%. It was at 1.25% or 1.00% for only about 21 months. That was the time that ING Direct's Orange Savings account yield was 2.00%. It's now stuck at 1.10%. Hopefully, we won't see it go lower this year.
Will the Fed start increasing the target Fed funds rate in 2011? I don't want to sound like a pessimist, but I'm afraid it's unlikely. As mentioned in this Calculated Risk blog post, we're probably going to have to see a large fall in unemployment and/or a sharp rise in inflation for the Fed to start to tighten its monetary policy. It is likely that unemployment will go down in 2011, but as this CR blog post describes, unemployment will likely still be at around 9% by next December. The Fed funds future charts are a little more optimistic. It's showing the implied probability of a higher Fed funds rate by next December at 47.2%
The Fed funds rate may keep short-term rates low, but long-term rates could rise like they have in the last two months. The 10-year Treasury yield has gone from 2.41% in October to 3.29% last Thursday. The Fed's QE2 hasn't been able to hold back the yields, and if economic growth continues along with the fear of inflation, long-term rates may continue to rise. Mortgage rates have risen with the Treasury yields, but unfortunately, we haven't seen any significant rise in CD rates.
Savings Account Rates
This was a quiet week for savings account rate changes. The information we received regarding Alliant Credit Union was correct. The savings account yield fell from 1.35% to 1.15% APY on January 1st. Several banks now have higher savings account rates than Alliant, but will those rates hold? Or is Alliant's rate cut unique? They have been a rate leader for a couple of years. It seems like any bank or credit union that has been a rate leader for more than a year eventually takes in enough deposits that they no longer have an incentive to remain a rate leader. Another issue with Alliant may be the NCUA's bailout of the corporate credit unions. All credit unions are having to pay higher premiums to the NCUA, and this may have some effects on deposit rates at all credit unions.
Rate Hikes:
- None
Rate Cuts:
- Alliant Credit Union Savings - 1.15% (was 1.35%)
- Alliant Credit Union Checking - 1.10% (was 1.35%)
Certificate of Deposit Rates
In addition savings and checking rate cuts, Alliant Credit Union also cut its CD rates last week. Rates went down by 20 basis points on all terms. Even with these rate cuts, its mid-term CD rates still remain competitive. PenFed posted its new January rates on the 1st. Its 5-year and 7-year CD rates were cut by 25 basis points. The 7-year CD yield is 3.00% which remains the top 7-year CD yield that's available nationwide. We may see more cuts on Monday since it'll be the first business day of January. Hopefully, we'll see some New Year specials.
Reward Checking Accounts
Reward checking rate cuts were also common. One of the top nationally available reward checking accounts had a rate cut. Southern Community Bank & Trust's reward checking yield fell from 3% to 2.25% APY for balances up to $25K. There have also been cuts at several popular local reward checking accounts. Cambridge Savings Bank in MA lowered the yield of its reward checking from 4% to 3.25% APY for balances up $25K. Landmark Bank's reward checking account yield fell from 5.01% to 4.10% APY for balances up to $25K. This was one of the very few institutions that was still offering 5% on balances up to $25K.
With reward checking, a rate cut is not the only worry. Cuts in balance caps can even be worse. A reader just reported that Community West Bank in California has lowered their balance cap from $25K to $15K. One thing this bank did that was unusual was to notify customers of this change by phone. Banks and credit unions may not be required to notify customers of rate and balance cap cuts, but I always appreciate at least an email notification before such changes are made. My opinion of a bank goes down when they don't notify their customers.
To find reward checking accounts available nationwide or to find those that are only available in your state, please refer to the reward checking section of DepositAccounts.com.
Recap for the Week - Links to This Week's Posts
Banking News/Resources
- Review of the 2010 Bank Failures and Their Effects on Depositors
- Bank Breaks CD Terms by Closing CDs Before Maturity
- The 10 Best Bank Deals for Savers in 2010
CD Deals - National
- PenFed CD Update for January
- Special 10-Month CD at Dime Savings Bank in New York - Available Nationwide
- Special No-Penalty CD at Southern Community Bank & Trust in NC - Available Nationwide
- Competitive Long-Term CD Rates at US Bank
- Incredible Bank's New 1-Year CD and the Problem with 1-Year CDs
CD and Money Market Deals - Local
- Competitive Long-Term CD Rates at Shelter Financial Bank in Several States
- Top Checking and CD Rates at Providence Bank in North Carolina - Local Only
- Top Short-Term CD Specials at Professional Bank in South Florida - Local Only
- Top Long-Term CD Rates at Premier Community Credit Union in Northern CA - Local Only
- Top CD and Money Market Rates Continue at F&A Federal Credit Union in California - Limited Membership
The rates listed below are based on Annual Percentage Yield (APY). No minimum balances are required unless noted. MMA next to the rates indicate a money market account. Most MMAs have check writing and ATM cards. Online savings accounts usually lack both of these. Previous weekly summaries are available at this page. Quick Links: Refer to the following links for the savings accounts and CDs that interest you: Liquid Account Rates: Savings Accounts, Reward Checking, Bank alternatives CD Rates: 3 Mo CDs, 6 Mo CDs, 9 Mo CDs, 12 Mo CDs, 18 Mo CDs, 24 Mo CDs, 36 Mo CDs, 48 Mo CDs, 60 Mo CDs, 84 Mo CDs, CDs by state.
Rates as of January 2, 2011
Checking/Savings/Money Market Accounts:
- Best Reward Checking Account Rates (Nationwide & by State)
- Best Savings Account Rates (Nationwide & by State)
- Best Money Market Rates (Nationwide & by State)
- Best Checking Account Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- EverBank - 2.01% ($5K min), 3 mo promo rate up to $50K (1.06% ongoing) account review
- SmartyPig - 1.75% (min $25, max $50K) withdrawal restrictions, account review
- AmericaNet/Evantage Bank - 1.75% (up to $35K, 1% over) account review
- The Morrill and James Bank - 1.51% Checking (min $1.5K) account review
- SFGI Direct - 1.41% (min $500 to open) account review
- Incredible Bank - 1.35% Checking ($1K min) account review
- Ready Saver - 1.35% account review
- Capital One/Costco - 1.30% InterestPlus Savings ($5K min) quarterly bonuses for $10K+, account review
- American Express Bank - 1.30%, account review
- Clear Sky Accounts - 1.30% account review
- Sallie Mae Bank - 1.30% (Upromise rewards) account review
- Hudson City Savings Bank - 1.25% (min $2.5K)
- Capital One - 1.25% InterestPlus Savings ($1K min) quarterly bonuses for $10K+, account review
- Discover Bank - 1.25% Savings (min $500) account review
- H&R Block Bank - 1.25% MMA (min $50K) account review
- WTDirect - 1.21% ($10K min) account review
- CNB Bank Direct - 1.20% account review
- Alliant Credit Union - 1.15% (min $100) account review
- Zions Bank - 1.11% ($1K min)
- ING Direct - 1.10% Orange Savings
- DollarSavingsDirect - 1.10% ($1K min) account review
- Colorado Federal Savings Bank - 1.10% ($2.5K min) account review
- Ally Bank - 1.09% MMA account review
- Noteworthy Accounts - Local Only
- Mid America Bank & Trust Company - 1.54% (min $10K) in MO
- Affinity Bank (formerly Atlanta Business) - 1.40% MMA (min $100K) in GA
- Solera National Bank - 1.25% (min $100) in CO
3-Month Certificates of Deposit:
- Best 3-Month CD Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- Self-Help CU - 1.01% (min $500) account review
- Fort Knox FCU - 1.00% (min $500)
- AmTrust Direct - 1.00% (4-mo) (min $1K)
- TotalBank - 0.85% e-CD (min $1K)
- Virtual Bank - 0.75% (min $10K)
- Ally Bank - 0.64%
- Noteworthy Accounts - Local Only
- Self Reliance New York FCU - 1.45% (min $500) in NYC
- Bank of Georgetown - 1.40% (4-mo w/relationship) (min $1K) in Washington DC metro
- NavyArmy FCU - 1.30% (min $100K) in South TX
6-Month Certificates of Deposit:
- Best 6-Month CD Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- Connexus CU - 1.50% Active checking required, account review
- America's Credit Union - 1.25% (min $25K)
- Colorado Federal Savings Bank - 1.10% ($5K min)
- Aurora Bank FSB - 1.10% (min $1K)
- Virtual Bank - 1.06% (min $10K)
- OneWest Bank - 1.05% (min $1K)
- Ally Bank - 1.04%
- Noteworthy Accounts - Local Only
- Massena Savings and Loan - 2.56% IRA-only (min $2.5K) in NY
- Self Reliance New York FCU - 1.65% (min $500) in NYC
- Affinity Bank (formerly Atlanta Business) - 1.41% (min $1K) in GA
- F&A Federal Credit Union - 1.40% (min $50K) in CA
- NavyArmy FCU - 1.40% (min $100K) in South TX
- Industrial Credit Union - 1.40% (min $1K) in MA
- Fayetteville Bank - 1.26% (min $500) (1.41% $100K+) in TX
9-Month Certificates of Deposit:
- Dime Savings Bank - 1.65% (10-mo) (min $500) req active chk account review
- TotalBank - 1.15% e-CD (min $1K)
- Virtual Bank - 1.11% (min $10K)
- OneWest Bank - 1.10% (min $1K)
- Discover Bank - 1.10% (min $2.5K)
- Easthampton Savings Bank - 1.10% (min $1K)
- Noteworthy Accounts - Local Only
- Island Federal Credit Union - 2.00% (min $2K) Requires active checking, in NY
- Miami Postal Service CU - 1.76% (min $5K) in Miami, FL
- Self Reliance New York FCU - 1.70% (min $500) in NYC
- NavyArmy FCU - 1.45% (min $100K) in South TX
12-Month Certificates of Deposit:
- Best One-Year CD Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- Connexus CU - 1.75% Active checking required, account review
- America's Credit Union - 1.55% (13-mo) (min $25K)
- RTN Federal Credit Union - 1.55% (min $50K)
- CNB Bank Direct - 1.50% (min $25K) (shown at the bank's online banking login page) account review
- Bank of Internet - 1.41% (min $1K) account review
- Melrose CU - 1.41% (min $5K) account review
- Colorado Federal Savings Bank - 1.35% (min $5K)
- North American Savings Bank - 1.35% (14-mo) (min $1K)
- Salem Five - 1.35% (14-mo) (min $10K)
- Sallie Mae Bank - 1.30% (no min) account review
- Incredible Bank - 1.30% (min $10K)
- Discover Bank - 1.30% (min $2.5K) account review
- Alliant Credit Union - 1.30% (min $25K) account review
- Ally Bank - 1.27% (min $0) account review
- Choice Financial - 1.25% (13 mo) (min $5K) add-on feature, account review
- Ally Bank - 1.19% (11-mo) (min $0) No-Penalty CD
- Noteworthy Accounts - Local Only
- Self Reliance New York FCU - 2.00% (min $500) in NYC
- NavyArmy FCU - 1.85% (min $100K) in South TX
- University of Iowa Community CU - 1.80% (15-mo) (min $100K) in Iowa
- Progressive Credit Union - 1.71% in NYC
- Affinity Bank (formerly Atlanta Business) - 1.71% (min $1K) in GA
- Barksdale Federal Credit Union - 1.61% (min $1K) in Louisiana
- Industrial Credit Union - 1.60% (min $1K) in MA
- Fayetteville Bank - 1.56% (min $100K) in TX
18-Month Certificates of Deposit:
- Best 18-Month CD Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- CNB Bank Direct - 1.65% (min $25K) (shown at the bank's online banking login page) account review
- America's Credit Union - 1.65% (min $25K)
- Alliant Credit Union - 1.55% (min $25K) account review
- Southern Community Bank & Trust - 1.50% (min $500) No-penalty
- Fort Knox FCU - 1.50% (min $500)
- Colorado Federal Savings Bank - 1.45% ($5K min)
- Aurora Bank FSB - 1.42% (min $1K)
- Discover Bank - 1.40% (min $2.5K), account review
- Acacia Federal - 1.40% (min $500)
- USAA Bank - 1.35% (min $1K) (1.70% $175K min) account review
- Ally Bank - 1.35% (no min)
- MetLife Bank - 1.35% (min $25K)
- First Savings Bank Northwest - 1.28% unlimited add-on (min $500) account review
- Noteworthy Accounts - Local Only
- Massena Savings and Loan - 2.82% IRA-only (min $200) in NY
- Self Reliance New York FCU - 2.10% (min $500) in NYC
- Affinity Bank (formerly Atlanta Business) - 1.82% (min $1K) in GA
- Hyde Park Savings Bank - 1.70% (16-mo) Online Only (min $1K) in MA
- Truliant Credit Union - 1.50% (17-mo) (min $1K) in NC, SC & VA
24-Month Certificates of Deposit:
- Best Two-Year CD Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- America's Credit Union - 2.05% (25-mo) (min $25K)
- CNB Bank Direct - 1.85% (min $25K) (shown at the bank's online banking login page) account review
- Fort Knox FCU - 1.75% (min $500)
- Alliant Credit Union - 1.70% (min $25K) account review
- Melrose CU - 1.66% (min $5K) account review
- OneWest Bank - 1.60% (min $1K)
- Colorado Federal Savings Bank - 1.60% ($5K min)
- Bank of Internet - 1.60% (min $1K)
- Ally Bank - 1.55% Raise Your Rate CD
- Noteworthy Accounts - Local Only
- Self Reliance New York FCU - 2.35% (min $500) in NYC
- First Peoples Community Credit Union - 2.20% (21-mo) (min $5K) in MD, PA & WV
- NavyArmy FCU - 2.15% (min $100K) in South TX
- Barksdale Federal Credit Union - 2.12% (min $1K) in Louisiana
- University of Iowa Community CU - 2.10% (25-mo) (min $100K) in Iowa
- Affinity Bank (formerly Atlanta Business) - 2.02% (min $1K) in GA
36-Month Certificate of Deposit:
- Best 3-Year CD Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- RTN Federal Credit Union - 2.25% (min $50K)
- Fort Knox FCU - 2.25% (min $500)
- Melrose CU - 2.17% (min $5K) account review
- Navy Federal - 2.15% (30-mo) (min $10K) membership restrictions account review
- America's Credit Union - 2.05% (min $25K)
- OneWest Bank - 2.00% (min $1K)
- Andrews FCU - 2.00% (min $1K) account review
- Bank of Internet - 1.91% (min $1K)
- Colorado Federal Savings Bank - 1.90% ($5K min)
- Alliant Credit Union - 1.90% (min $25K) account review
- USAA Bank - 1.85% (min $1K) (2.15% $175K min) account review
- Acacia Federal Savings Bank - 1.85% (min $500) account review
- Sallie Mae Bank - 1.75% (no min) account review
- Pentagon Federal CU - 1.75% (min $1K), account review
- Noteworthy Accounts - Local Only
- Sea Comm Federal Credit Union - 2.63% (min $1K) in Northern NY
- First Peoples Community Credit Union - 2.60% (39-mo) (min $5K) in MD, PA & WV
- Massena Savings and Loan - 2.56% (min $1K) in NY
- Barksdale Federal Credit Union - 2.43% (min $1K) in Louisiana
- Security Service FCU - 2.35% (min $100K) in TX & CO
- Affinity Bank (formerly Atlanta Business) - 2.32% (min $1K) in GA
- American Heritage Credit Union - 2.30% (min $1K) in PA
- Redding Bank in Commerce - 2.27% (min $100K) in Northern CA
- Montauk Credit Union - 2.25% in NYC
- Fort Bragg Federal Credit Union - 2.23% (min $25K) in NC
48-Month Certificate of Deposit:
- Best 4-Year CD Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- America's Credit Union - 2.55% (min $25K)
- Fort Knox FCU - 2.55% (min $500)
- Melrose CU - 2.42% (min $5K) account review
- Alliant Credit Union - 2.30% (min $25K) account review
- Self-Help CU - 2.28% (min $500) account review
- OneWest Bank - 2.25% (min $1K)
- EverBank - 2.25% ($1.5K min) account review
- Hudson City Bank - 2.25% (min $5K) account review
- Pentagon Federal CU - 2.25% (min $1K), account review
- Bank of Internet - 2.16% (min $1K)
- Acacia Federal Savings Bank - 2.10% (min $500) account review
- Noteworthy Accounts - Local Only
- Barksdale Federal Credit Union - 2.89% (min $1K) in Louisiana
- Education First CU - 2.75% in SE Michigan
- Sea Comm Federal Credit Union - 2.75% (min $1K) in Northern NY
- LOMTO FCU - 2.63% in NYC
- The Napoleon State Bank - 2.58% (min $50K) in IN
- Police & Fire Credit Union - 2.50% (min $500) in PA
- First Community CU - 2.42% w/relationship (min $300) in MI
60-Month Certificate of Deposit:
- Best 5-Year CD Rates (Nationwide & by State)
- Noteworthy Accounts Available Nationwide:
- Connexus CU - 3.00% Active checking required, account review
- Melrose CU - 2.93% (min $5K) account review
- Salem Five - 2.75% (min $10K)
- Fort Knox FCU - 2.75% (min $500)
- Velocity Credit Union - 2.63% (min $1K) (2.73% IRA)
- EverBank - 2.61% ($1.5K min) account review
- US Bank - 2.50% (59-mo) (min $1K)
- OneWest Bank - 2.50% (min $1K)
- Acacia Federal Savings Bank - 2.50% (min $500) account review
- Andrews FCU - 2.50% (min $1K) account review
- Pentagon Federal CU - 2.50% (min $1K), account review
- Colorado Federal Savings Bank - 2.45% ($5K min)
- Navy FCU - 2.40% ($20K min) (2.50% $100K+) restrictions to membership, account review
- USAA Bank - 2.40% (min $1K) (2.45% $175K min) account review
- Ally Bank - 2.40% (min $0) account review
- First Internet Bank - 2.40% (min $1K)
- Sallie Mae Bank - 2.35% (no min) account review
- Noteworthy Accounts - Local Only
- PEF Federal Credit Union - 3.29% (min $500)
- LOMTO FCU - 3.10% in NYC
- First Peoples Community Credit Union - 3.10% (min $5K) in MD, PA & WV
- Barksdale Federal Credit Union - 3.04% (min $1K) in Louisiana
- Security Service FCU - 3.00% (min $100K) in TX & CO
- Police & Fire Credit Union - 3.00% (min $500) in PA
- Sea Comm Federal Credit Union - 2.99% (min $1K) in Northern NY
- First Choice Bank - 2.90% (min $1K) in NJ
- Hudson Valley Credit Union - 2.85% (min $500) in NY State
- F&A Federal Credit Union - 2.75% (min $50K) in CA
84-Month Certificate of Deposit:
- Best 6+-Year CD Rates (Nationwide & by State)
- Capital One - Costco - 3.05% 10yr (min $5K)
- Navy FCU - 3.00% 7yr ($20K min) restrictions to membership, account review
- Capital One Direct Banking - 3.00% 10-yr (min $5K)
- Pentagon Federal CU - 3.00% 7yr (min $1K), account review
- Discover Bank - 2.75% 7yr (min $2.5K) (3.00% 10yr) account review
- USAA Bank - 2.70% 7yr (min $1K) (2.74% $175K min) account review
- Apple FCU - 2.60% 7yr (min $500) (3.25% 10yr) account review
- Noteworthy Accounts - Local Only
- Security Service FCU - 3.50% 7yr (min $100K) in TX & CO
- Randolph-Brooks Credit Union - 3.45% 7yr (min $75K) in Central TX
- Anchor Mutual Savings Bank - 3.00% 8yr (min $500) in WA
- Access National Bank - 3.00% 7yr (min $10K) in VA, DC & MD
- Montauk Credit Union - 3.00% 7yr in NYC
- Cardinal Bank - 2.91% 6yr (min $1K) in VA, DC & MD
Various Deposit Account Deals
- Bank Deals Forum
- Checking/Savings Account Bonuses
- Best IRA CD rates, local and nationwide deals
- Latest CD and Savings Account Deals with No Major Deposit Limitiations
Bank Account Alternatives
- Ford Interest Advantage - 1.65% rate for $50k+, Ford Interest Advantage review
- GE Interest Plus - 1.45% rate for $50k+
- Vanguard Tax-Exempt Money Market Fund - 0.19% 7-day yield
- Paypal Money Market Fund - 0.12% 7-day yield
- Vanguard Prime Money Market Fund - 0.06% 7-day yield
- Fidelity Money Market Fund - 0.01% 7-day yield (reviews on Fatwallet)
- Fidelity Municipal Money Market Fund - 0.01% 7-day yield
- TIAA-CREF Money Market Fund - 0.00% 7-day yield
- FW Thread on Treasury Bills
- I & EE Savings Bonds for 2010, I Bond Article, I Bonds as CD Alternatives
Historical Rates from the Federal Reserve (Federal funds, Treasury bills, CD's)
Anonymous - #2, Sunday, January 2, 2011 - 9:40 PM
These are interesting times for sure. I was pretty much resigned to the fact that QE2 would hurt deposit accounts. But I was expecting it would at least take mortgage rates lower and make it possible to refinance at a killer rate, as it should have. But there is so much volatility in the market and such uncertainty about inflation that rates paradoxically shot up by roughly a full point in a matter of a few weeks. Just can't win. The mattress is looking better all the time!
Bozo (anonymous) - #3, Monday, January 3, 2011 - 8:22 AM
I was joking yesterday with my wife about how low interest rates are. I told her that our "ready reserve" account at Alliant now generates a buck per day (and falling). You betcha, not much better than a mattress. If it gets any worse, they'll start charging us to give them our money.
Ugggh.
Bozo
pearlbrown - #4, Monday, January 3, 2011 - 9:11 AM
Bozo, I've considered "Posturepedic Bank" myself a time or two - no worries about how long ACH transfers take :-)
mrvirgo - #5, Monday, January 3, 2011 - 10:33 AM
Most of my cash is in old CDs, happily paying from 3-5%. My cash savings is in rewards checking also paying 3% (as of today). If it weren't for this rewards checking I would opt for Bank of Mattress for sure. When clipping a grocery coupon gets me more money than a month's worth of interest, having a savings account seems like an exercise in futility.
AnonymousPig (anonymous) - #6, Monday, January 3, 2011 - 1:23 PM
Ugh. SmartyPig just cut their rate. This is an update since I logged in earlier this morning:
Effective January 3, 2011, the interest rate paid on SmartyPig savings accounts has changed. The interest rate earned on balances* $0.00 - $50,000.00 will earn 1.343% (1.35% APY). The interest rate earned on balances* above $50,000.00 will earn 0.499% (0.50% APY). *Balances: For purposes of calculating balances for determination of the rate tier that applies, total balances of all goals within your SmartyPig profile will be aggregated.
Bozo (anonymous) - #7, Monday, January 3, 2011 - 3:16 PM
I spent the whole friggin morning on my Schwab account, selling everything, assuming this bubble won't last.
Totally weird.
Bozo
Anonymous - #8, Monday, January 3, 2011 - 6:11 PM
I did that years ago, just before retiring. Created a nice laddered CD portfolio with all of it. Made for a very nice income even though my annual interest income has been declining the last couple of years, but still good thanks to the CD ladder. It would be tough to just start out building a CD ladder in today's interest rate climate. Many thanks again to Ken for helping me along the way.
Bozo (anonymous) - #9, Wednesday, January 5, 2011 - 11:24 AM
The bond vigilantes are having some fun today. It's not a good day to be long in a bond fund. As I try to explain to the wife, as the ten year tanks, your CDs look better and better. Even a checking account at zero interest is better than bond funds these days.
Bozo
Anonymous - #10, Wednesday, January 5, 2011 - 12:40 PM
I want to get a traditional IRA now for tax purposes -why can't I find current rates and costs? I have always easily researched rates on MM, CDs and the like, but IRA rates and costs seem "hidden" from public view. Why is that and where is the most current database I can view on the web?
Bozo (anonymous) - #11, Wednesday, January 5, 2011 - 1:51 PM
To Anon @10 (re Traditional IRAs):
An IRA (whether it be Traditional or other) has no "rate". It's just a holding tank, as it were, for an investment.
I have many different Traditional IRAs, for example, some go up, some go down, most go round and rouind
If you are lucky, mostly stuff goes up.
Bozo
Anonymous - #12, Wednesday, January 5, 2011 - 2:08 PM
Anonymous #10: This site has a good database of some IRA options and current yields: http://www.depositaccounts.com/ira/
As for any hidden costs and such, contact the institution and read the prospectus for mutual funds.
Bozo (anonymous) - #13, Wednesday, January 5, 2011 - 2:27 PM
More on Traditional IRAs:
These are most often used to roll-over existing 401K investments. As such, the existing investment may have had a gain, or a loss, before you roll-over. Now, most folks associate roll-over with their cat or dog, as in (you get the idea). You can also invest directly in Traditional IRAs, but what you invest in is up to you. Which is the point. If you invested in a PenFed IRA a couple of months ago, good for you. If you invested the same amount in a bond fund, well, you're not so happy.
Hope this helps.
Bozo
Anonymous - #14, Wednesday, January 5, 2011 - 5:40 PM
One of my Roth IRAs is invested in a bond fund. It earned a return of 10.94% last year and is up 0.95% this year. The 30 day yield is 5.34%. Must be other types of bond funds that have dropped.
Bozo (anonymous) - #15, Wednesday, January 5, 2011 - 6:19 PM
Bond funds were down today, actually. I have a big problem explaining to my Mother why her bond fund goes down when interest rates go up. It's not intuitive. One might think having "X" dollars in a bond fund, when rates go up, that's good. Actually, it's bad, very bad. Your bond fund has a duration something above zero (checking accounts have the classic duration of zero). Going forward, being in a bond fund is a very bad idea, as interest rates will go up, and bond fund par values will go down. Just compare what happened today to my Vanguard total stock market fund ((VTSAX), up .57, and my Vanguard balanced fund (VBIAX), up only .14. The difference? Bonds.
It's weird, but it's the way the market works. The last twenty years or so we had a remarkable rally in bond funds. That stuff is over, trust me (I'm a lawyer). Tee hee.
Bozo
Anonymous - #16, Wednesday, January 5, 2011 - 8:20 PM
As interest rates rise, both stock and bond investments suffer. Who makes money in rising rates? Banks and savers (those only in bank products and money market mutual funds). Bonds are seen as a "cushion" to people who also invest in stocks because they are seen as less volatile (but that of course, is not always the case). There isn't really any mystery about investing. Anything outside of bank products can produce negative returns, period. Some exceptions are single issue bonds (where you hold until maturity and unit investment trusts). Anytime you see the word "fund" that should signal to someone that you could lose money (even money market mutual funds).
Bozo (anonymous) - #17, Wednesday, January 5, 2011 - 9:51 PM
Money market mutual funds? Granted, you won't lose money, but .07%? Even a CD at 3% is better. Do the math.
By definition, a CD has zero duration, and no risk. Even my Mom's bond fund (which did quite well over the past 20 years) is just returning principal at this point.
I wouldn't call that a very good investment.
Bozo
Anonymous - #18, Thursday, January 6, 2011 - 4:59 PM
Money market mutual funds were the "hot" investment fad back when they began in the early 1980s. Their rates were much higher than any of the bank's passbook rates which were set by law. Then the banks lobbied Congress to allow them to issue Money Market account to compete with the mutual funds. Up until 2008, money market mutual funds always beat the bank's rates. The only reason why their rates are so miniscule now is because the Fed has forced rates down and the investments that the mutual funds are allowed to buy are paying hardly anything. Banks have other sources of income (mortgages, credit cards, loans, trust services, etc.) which allows them to offer a rate higher than funds. When rates go back up, most likely the advantage will return back to the money market mutual funds. You cannot equate a CD with a bond fund. A bond fund has no fixed term and fluctuates like a stock fund. As rates hit 0%, a bond fund has nowhere to go but down as far as total return goes. For bond funds, you should buy when interest rates are high and sell when rates are low. Which is the opposite strategy for stocks - sell high, buy low.
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