State Farm Bank Raises 60-Month CD Rate

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Availability: Nationwide (internet bank)

It’s been almost a year since I last wrote about State Farm Bank; the occasion for this blog post is yesterday’s rate increase on the 60-month CD (2.10% APY). Since January 2016, there have been eight rate changes (mostly downward), but in the past three weeks there have been two rate increases, resulting in 40 basis points being added to the APY.

The minimum deposit to open any State Farm Bank CD is $500, and while State Farm Bank’s website lists two balance level tiers (up to $100K and $100K+), the above APY applies to both tiers.

APYMINMAXINSTITUTIONPRODUCTDETAILS
2.10*%$500-State Farm Bank60 Month CD
2.10*%$500-State Farm Bank60 Month IRA (Traditional, Roth)
2.10*%$500-State Farm Bank60 Month CESA
Accounts mentioned in this post. Rates as of January 17, 2017.

The 60-month CD is available as an IRA (Traditional, Roth, and CESA), earning the same APY with the same funding requirements. More detail on these CDs can be viewed on the Bank’s rate page. Entering your zip code is required to view the rates, but the previously mentioned rates apply to all zip codes.

As stated on State Farm Bank’s Truth in Savings Disclosure page, the Early Withdrawal Penalty reads (in part) as follows:

There is a minimum of $25 penalty or the following,

    Penalty equal to 545 days' interest (earned or not) on the principal withdrawn for a CD Term of 48 months or greater

Availability

Headquartered in Bloomington, Illinois, State Farm Bank offers accounts nationwide through the internet, by phone, and through individual State Farm agents. Anyone with a valid Social Security Number (SSN), Tax Identification Number (TIN) or Individual Taxpayer Number (ITN) can open an account with State Farm Bank.

State Farm Bank was established in 1999 as a separate entity, distinct from the ubiquitous State Farm insurance brand, and is currently the 78th largest bank in the country with assets in excess of $16.8 billion.

Opening a CD with State Farm Bank can be opened online, by phone, or by visiting a State Farm agent. If you chose to open the CD through a State Farm agent, please note that beyond opening the CD, the individual agent has no fiduciary responsibility and you must manage your account online or by phone.

I have written in the past in greater detail about State Farm Bank's CDs/IRAs, but one feature bears repeating:

Normal distributions will be allowed on IRAs without incurring an early withdrawal penalty for customers who have reach age 59½.
Transfers or rollovers to another IRA are not considered normal distributions.

This is significant, since many banks do not waive early withdrawal penalties for this type of distribution.

Bank Overview

State Farm Bank (FDIC Certificate #34617) has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 5.68% (excellent) as of September 30, 2016. In the past year, State Farm Bank increased its total deposits by $359.7 million, an above average annual growth rate of 3.42%. Please refer to our financial overview of State Farm Bank for more details.

How the CD Compares

When compared to the 169 similar length-of-term CDs tracked by DepositAccounts.com that require a similar deposit and are available nationally, State Farm Bank’s 60-month CD APY currently ranks fourth.

The above rates are accurate as of 12/9/2016.

To look for the best nationwide CD rates and the best CD rates in your state, please refer to our CD rates table or our Rates Map page.

Comments
Bozo
Bozo   |     |   Comment #1
StateFarmBank is my personal "canary in the coal mine", as I have had IRA CDs with them for ever so long (more than a decade). As Ken noted, SFB is one of the few financial institutions which offers (last I checked) no EWP on partial withdrawals from IRA CDs for those age 59 1/2 or over. I've made two modest withdrawals on my SFB IRA CDs over the past decade, and it really does work as advertised. No EWP, and the balance remaining on the IRA CD just clicks right along at the stated rate.

For those readers of DA in the eleven-year period between 59 1/2 and 70 1/2 (when EWPs are routinely waived for RMDs), this perquisite can be a plus.
Bozo
Bozo   |     |   Comment #2
PS: For your chuckle of the day, ask your local State Farm agent if he or she is aware of this perquisite. Don't be shocked if he or she is not. Mine wasn't. SFB, for whatever reason, does not "market" this perquisite with any gusto.

Some trivia: the easiest way to open a SFB CD (IRA or after-tax) is to open it with your local State Farm agent. The agents have a direct connection to the Bank via their computers, and can fill out all the paperwork and lock in the rate on your CD while you wait. It's totally painless.
Anonymous
Anonymous   |     |   Comment #4
That wouldn't be the way I would go about it.  Local State Farm agents will then try to sell you other State Farm products to boost their commissions and meet their sales goals.
Anonymous
Anonymous   |     |   Comment #5
Strongly agree but for a different reason.  I live in a smaller community.  Last thing I'd ever do is open any sort of bank account with my State Farm agent, even though I have auto and home insurance with her without hesitation.  But it's a matter of privacy for me.  I do not want others knowing my bank balance.  So I do not want my State Farm agent knowing it, either.  Would she blab?  Probably not.  But she has several lower level employees in her office who just might.
Bozo
Bozo   |     |   Comment #6
To: Anonymous (Comment #4).

Goodness, gracious. One might think a polite "no thank you" would suffice. Judy (my local agent) always tries to cross-market me when I visit to open or renew a CD. She grins, I grin, she gives up. She is no less helpful.

Having tried to deal with StateFarmBank both over the phone (be prepared for a long time on hold) and online, the short drive to Judy's office is so much easier.

Oh, and a thought to anonymous poster of comment #5, I suggest you check the State Farm privacy policy. I suspect any CD (IRA or otherwise) you open with SFB is "common knowledge" within the State Farm community. Whether you open it on-line, over the phone, or through an agent, "Judy" will know.
Anonymous
Anonymous   |     |   Comment #9
I posted as #5.  Bozo, you did not understand my post.  But I admit I could have written more clearly.  I wrote I would never open a bank account with my State Farm agent, and that is true.  Perhaps I should have added I would never do business with State Farm bank, either, regardless means of contact.  I'm well aware my State Farm agent, and others in her office, can see my bank balances regardless where, or how, I deal with State Farm bank.  That is unacceptable to me.  So I never have done business with State Farm Bank and I never will deal with them.  Period.
Anonymous
Anonymous   |     |   Comment #10
Me neither.  Why get 2.1% at State Farm for a 5 year cd when you can get 2.3% at a credit union?
Bozo
Bozo   |     |   Comment #11
To: Anonymous (Comment #10).

It's a bit esoteric, but the difference is with respect to IRA CDs (and partial withdrawals therefrom) and those of us who are aging Baby Boomers. It's all about the EWP (or lack thereof).
Bozo
Bozo   |     |   Comment #16
To: Anonymous (Comment #9).

Just curious. Is this an issue you have with the local State Farm agent? Stated another way, are you concerned he or she is a blabber-mouth about your assets? If so, I would certainly write to the home office. Just a thought.
Anonymous
Anonymous   |     |   Comment #12
I take it you have never dealt with high pressure insurance salesmen/women?  Sometimes  a polite "no thank you" isn't enough.

I just plain don't like that attitude.  Of course not all are like that, however I avoid getting into those confrontations as much as possible.
Anonymous
Anonymous   |     |   Comment #7
Another aspect with some/all insurance agents deals with termination of your insurance when the agent retires/dies and one case I'm aware of it never provided a state mandated notice of non-renewal.  Check with your agent on whether or not your policies will continue and/or will you be able to obtain (new) insurance with new(?) underwriting!
Bozo
Bozo   |     |   Comment #8
To: Anonymous (Comment #7).

The death or retirement of an insurance agent should have nothing to do with either your insurability (which is based on underwriting) or your rates (ditto). The agent is just that, an agent. He or she acts as an intermediary between you and the carrier (the insurance company). Stated another way, you don't purchase insurance from your agent. You purchase it from the carrier, the insurance company. 

With respect to notices (cancellation, non-renewal, rate increases or decreases, etc.), those should all be generated by the carrier. That said, the local agent might have some role to play. A few years back, my Mom died, and the family home was insured by State Farm. I advised the local agent, and he told me to sell as quickly as possible, as he would have to report the death to the carrier. Unoccupied homes are basically a "no-no" when it comes to homeowners insurance. Sure enough, as he predicted, I received a notice of non-renewal just as I was closing on the sale of the house. Thanks to his sage advice, I never had a lapse in coverage.
Anonymous
Anonymous   |     |   Comment #21
Bozo, the role of the agent being around is one thing...but the representations that the old agent made are now gone.  Carriers want to clean the slate and thus (if smart) will not renew when the originating agent is no longer there unless with a new agent
Anonymous
Anonymous   |     |   Comment #14
Bozo - That's an interesting perquisite that the State Farm IRA CDs have, regarding no EWP on partial withdrawals from IRA CDs for those age 59 1/2 or over.    I'm curious - do they offer that same perquisite on their regular, non-IRA CDs?  I very much doubt it, but I thought it was worth asking. 
Bozo
Bozo   |     |   Comment #17
To: Anonymous (Comment #14),

The perquisite is for IRA CDs only, and only for folks 59 1/2 years of age and older. And, mind you, it must be a "partial" withdrawal, i.e., an amount so as to leave enough in the account as to qualify for the initial IRA CD. That's usually $1000. So, if you have an IRA CD worth $100,000, a $99.000 partial withdrawal would be allowed, and you would not be charged an EWP.
Anonymous
Anonymous   |     |   Comment #20
That is a good feature to have.  
Can these early withdrawals be characterized as a IRA transfer to another institution to get a better rate?
Is this no fee early withdrawal in writing or just a policy?  
If it is just a policy and if interest rates were to increase in the near future, I would have to think things might change on this no fee EWP to prevent a surge of withdrawals.
Bozo
Bozo   |     |   Comment #22
To: Anonymous (Comment #20).

Technically, the EWP is waived on partial withdrawals from IRA CDs (for folks 59 1/2 or older), if (and only if) the withdrawal is just that, a withdrawal. Custodian-to-custodian transfers do not qualify. I said "technically" for a reason. Theoretically, one could do a partial withdrawal, get the check, then do that "once-per-year" rollover into a higher-rate IRA CD, if done within 60 days. I haven't done such an end-run, but I suspect others might have.

The no EWP (as stated) is, indeed, in writing, It is in their disclosures. That said, could it be modified or changed? Perhaps. Frankly, I suspect so few people even know about the perquisite (much less avail themselves of it), it's not on the radar at the Bank. As I noted at comment #2 (above), my local agent was not even aware of the perquisite.

If you feel you might need this option, it might be wise to keep IRA CDs spread across several financial institutions which offer the perquisite. PenFed does. Northwest FCU does (last I checked). Patelco does. And, of course, StateFarmBank does.
James Barnes
James Barnes   |     |   Comment #25
What is the maximum FDIC or NCAU insurance that a depositor can have on an IRA account at a single bank or credit union?  I do not believe that one can have Payable on Death accounts in conjunction with an IRA account.  Does this mean that the maximum insurance that a depositor can have on an IRA account is $250,000?
Bozo
Bozo   |     |   Comment #26
James Barnes, the maximum insurance (either through the FDIC or NCUA) with respect to IRA CDs is $250,000. By definition, they are "individual" retirement accounts. That said, they are trusts, and, as such, may have beneficiaries, both primary and secondary.  Naming beneficiaries does not, however, increase insurance limits. In addition, as far as I know, having multiple IRA CDs at one institution does not increase coverage. As I understand it, your limit is "per institution", and is capped at $250,000.

"Pushing limits" is a problem many would like to have, I might add.
jib2424
jib2424   |     |   Comment #30
Thank you. I guess if one wants more than $250,000 insurance on IRA accounts, it is necessary to open up IRA accounts at more than one bank or credit union.
Bozo
Bozo   |     |   Comment #31
Jib2424 (comment #30), that is what folks "pushing limits" resort to. Frankly, I don't see folks stressing out over insurance limits like they did back in 2008, when financial institutions were failing left and right. Is this a good thing, or merely a sign of investing hubris? I suspect the latter.

It seems like retail investors, by and large, have a serious problem with memory. As in, it is very short-term. Case-in-point, I have been selling into this Trump rally. Have you?     
James Barnes
James Barnes   |     |   Comment #32
I am totally out of the stock market.  I expect a severe correction.
Anonymous
Anonymous   |     |   Comment #33
... but it's different this time
#3 - This comment has been removed for violating our comment policy.
#13 - This comment has been removed for violating our comment policy.
Anonymous
Anonymous   |     |   Comment #19
I believe State Farm CDs can be opened online. I had one years ago and I have never met my agent. Once dropped off paperwork for my new vehicle.
Bozo
Bozo   |     |   Comment #27
To: Anonymous (Comment #19).

Dinosaur that I am, I like somebody else to fill out the paperwork while I wait. One nice thing about dealing with an agent is the rate-lock. In a custodian-to-custodian IRA CD transfer, one concern I always have is whether the advertised rate will be the actual rate. When dealing with a State Farm agent, they have the ability to rate-lock on application.

Many financial institutions have this irritating fine print that states, in effect, the rate we quote today might not be the rate you get when your transfer arrives. With State Farm (at least when you use the agent), "what you see is what you get". The rate quoted on the date of the transfer application is the rate you get. Moreover, as my agent told me, if the rate goes up from the time of application to funding, you can call her, ask the application be "pulled", and the higher rate will apply.
jimbeau
jimbeau   |     |   Comment #23
Well, that no EWP looks pretty good in the era of Trump.   You can hedge your bets with regards to interest rate risk by accepting a marginally lower interest rate.
 
However, the ratings for State Farm Bank stink.  11 out of 27 reviews are 1 star!  That's pretty bad.  Even discounting the flakier reviews, it's pretty apparent that SFM bank has some problems.

As far as the refusing to renew the homeower's policy due to it being vacant after the death of the owner, that agent was way out of line suggesting that the house be sold quickly.

State Farm offers an endorsement on most policies for around $100 bucks for vacant home coverage. 

Even if this wasn't available upon the death of the owner they offer separate vacant home insurance.  It cost's more.  However, selling a home isn't something that should be rushed.
 
Bozo
Bozo   |     |   Comment #24
Jimbeau, my Mom's agent suggested what he suggested (and I talked to him personally) for what I suspect was a good reason. Immediately after I reported my Mom's death, the carrier sent out an "inspector" to the house. Bottom line: the inspector opined the roof was shot and, as either a vacant dwelling or a rental, would be "high risk". I seem to recall the premium increase was well above $100, and a full roof replacement would have been required.

Aside from the inherent pain of being a landlord for a house half-way across the country, the uncertainty of the insurance probably tipped me into doing what I was contemplating, in any event. As it turned out, sold at a very fair price, and very quickly. No regrets.
RJM
RJM   |     |   Comment #28
I have been going without homeowners insurance all my life. When I bought my house about 13 years ago, I intended to get it and found a good rate at Farmers I think. Only they pulled their rate when they realized I didn't have "renters insurance" at my apartment.  So they wanted to jack up the rate 20% or so the first year. I went without.

Now, my roof has about had it. I had a guy come out & replace some shingles and he quoted me a pretty good rate on a metal roof. Of course, he isn't licensed or bonded. I called the guy across the street who had a roof put on recently, the landlord I mean. He used someone just like that but wouldn't recommend them for insurance reasons. (His house was in an LLC)

Id really like to save $1500-2000 on a roof if there was a way to immunize myself from liability if this guy and his one helper might fall.

Regarding 2.1% 5 year rates, I just bought a new issue at fidelity. There were only TWO left with a closing date of the 9th so that's all I could get. (That's $2000)

I signed up for a 2nd one, a larger amount with a date of the 14th.

I noticed my $2000 CD is being valued at less than $2000. Wait, it WAS less than $2000 but now its slightly above it. I guess I didn't expect mark to market pricing. Not that its a huge deal.

I wouldn't have signed up if I didn't intend to hold for the 5 years.

And I'm not sure I trust their prices anyway. $2000 would be "too small" and a multiple of that would be "too large" to sell in the open market at a fair price.

Anyway, I'm a big boy and I signed up for 5 years and I expect I will hold for 5 years.

Id very much like to get my roof done for less. But at the same time, I very much don't want to overpay $2000 just to have some insurance that I probably wont need.
Anonymous
Anonymous   |     |   Comment #29
Yes, jimbeau, your right.  That's why many comments posted here should not be taken as fact and personal financial decisions should not be based on them.  
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