About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Four Important Points about PenFed’s CDs and IRA CDs


I’m glad to see PenFed is still offering the very high CD rates. When I first reported on these on December 1st, I was concerned that they may not last through December. As I mentioned, PenFed no longer guarantees the CD rates will last for the entire month. However, I can’t remember a time when PenFed lowered CD rates before the end of the month. In addition, I see PenFed has a rotating banner on its home page advertising the 3.04% 5-year CD, and that banner says "your gift for the holidays". So it seems likely PenFed has no intention of ending these CDs early.

2.12%$1k-PenFed Credit Union5 Year Money Market Certificate
1.81%$1k-PenFed Credit Union4 Year Money Market Certificate
Accounts mentioned in this post. Rates as of August 16, 2017.

I thought it would be useful to highlight a few points about PenFed CDs and IRA CDs. First, if you’re wondering how PenFed’s CDs may fit into your portfolio, this post at The Finance Buff by Harry Sit should be useful. Thanks to DA member cumulus for noting this in the forum. The Finance Buff article compares the likely performance of a bond fund to a 5-year CD over the next five years. Harry concluded "[I]n most cases the CDs will come out ahead."

The second point about PenFed CDs is to keep PenFed’s 4-year CD in mind. This can be easily overlooked since the yield is much lower than the 5-year CD (2.22% APY vs 3.04%). However, the 4-year CD has one advantage. That’s a maximum early withdrawal penalty of only 180 days of interest. The 5-year CD has an EWP of 365 days of interest. If you think it’s very likely that CD rates will be going up in the next couple of years, the 4-year CD may be a better choice for you. As you can see in our CD Early Withdrawal Penalty Calculator, the effective yield of the 4-year CD is higher when closed before 28 months. After 28 months, the 5-year CD effective yield will then be higher when the 5-year CD is closed early. Thanks to DA member cumulus on bringing this point to my attention.

PenFed’s 4yr CD closed after 18mo has an effective yield of 1.48%

As we discussed many times, there are risks on using the early withdrawal strategy to maximize your short-term CD yields. However, PenFed has a history of being honorable with its early withdrawal penalty. When it increased the EWP on its 5-year CD, the larger EWP did not affect existing CDs. It only affected new CDs and CDs that had been renewed.

The third point about PenFed CDs is that they do not allow partial early withdrawals (except for IRA CDs). Thus, you may want to open multiple small CDs instead of one big CD. That would allow you to close one or more small CDs if you need some money in the future. You can see more of these CD details at the bottom of PenFed’s Money Market Certificate Application (Form 688).

PenFed’s IRA CDs have more flexibility. That’s the fourth point. According to PenFed’s IRA Application Booklet:

Partial withdrawals may be made, subject to early withdrawal penalties as described in paragraph (g) below, providing the requested withdrawal amount does not reduce the original issue below a minimum of $1,000 for 1-, 2-, 3-, 4-, 5-, or 7-year IRA Certificates, in which case the funds will be transferred to the IRA Share account.

Not only are partial withdrawals allowed, but there is no penalty "if the owner has reached age 59½ and takes a partial withdrawal." That is one of four early withdrawal penalty exceptions listed in paragraph (g). This can be a very nice feature for those with IRA CDs.

PenFed Membership

PenFed makes it easy for anyone to join and open accounts online. If you don't qualify based on military, employer or family, you can become eligible by joining the National Military Family Association (one-time $20 fee) or by joining the Voices for America's Troops (one-time $15 fee). Joining one of these organizations and joining PenFed can be done at the same time all online. Our PenFed overview section has more details on PenFed’s membership qualifications.

To join PenFed, click on the "Join PenFed" link at the top of any PenFed page. This will take you to the start of the online application. That first page asks about eligibility. If you don't qualify via any of the listed options, click "None of the above". A popup informs users that "We can establish your membership eligibility through either National Military Family Association or Voices for America's Troops." When you close the popup, you are then asked to select one of these two organizations.

Branch Locations

Accounts can be opened online, but for those who prefer opening accounts in an office, PenFed has branches in several parts of the country including Washington DC, Maryland, Virginia, New York, North Carolina, Hawaii, Puerto Rico and Texas.

Credit Union Overview

PenFed is the third largest credit union in the nation. It has $12.6 billion in deposits. PenFed has an overall health grade at DepositAccounts.com of A with a Texas Ratio of 3.15% (excellent) based on September 2013 data. Please refer to our financial overview of PenFed for more details. It's federally insured by the NCUA (Charter # 227).

Searching for the Best CD Rates

To search for the best nationwide rates and the best rates in your state, please refer to the following tables at DepositAccounts.com:

Related Pages: CD rates, IRA rates

Related Posts

Shorebreak   |     |   Comment #1
As an aside, thanks Ken for making it easier to post comments on this blog. Specifically, posting links to an article when utilizing Firefox as a browser.
Anonymous   |     |   Comment #2
Does PenFed require membership of both parties of a joint CD?  I am now a member but am over the insurance limit and want my spouse as a joint holder of the CD.  In this case, is dual membership a requirement?
Anonymous   |     |   Comment #3
My spouse did not join and she is JROS on my CD's.  I don't know if PENFED would allow her to be a primary.; I doubt it.  You make the decision if the CD is to be joint when you get the paperwork.
kcfield   |     |   Comment #12
I would just have your spouse join the family association that enables one without the military background to join Pen Fed. The membership does not have to be renewed.
Fred   |     |   Comment #4
No, however the CD must be issued on the primary member holder name.
paoli2   |     |   Comment #5
I asked Penfed about this and they said if a spouse wants to be Primary on a CD they must become a member.  They can be Joint so all our CDs have me as primary and DP as Joint with Survivorship.  Since we aren't running over the insurance limits, it does not seem necessary for both of us to be Primary.
Anonymous   |     |   Comment #6
If a PenFed Primary account holder has a 250M CD in his sole name with his spouse as POD and another 250M account with him as the Primary and his spouse as a joint holder, would both 250M accounts be insured?
Anonymous   |     |   Comment #9
Yes, both insured.
Anonymous   |     |   Comment #10
Many thanks.
Anonymous   |     |   Comment #8
To #2 When my husband was joint on my accounts he did not have to join but when he put his IRA's at Pen Fed he had to join. 
Anonymous   |     |   Comment #11
One shortcoming is that Penfed does not presently allow for a jointly held account with POD beneficiaries.
lou   |     |   Comment #13
I believe you are wrong as I already own certificates titled this way.
Anonymous   |     |   Comment #14
How does that account title work if one joint owner dies?  Entire account to other joint owner without restriction, none to POD.
Anonymous   |     |   Comment #15
Nope, there's no provision for beneficiaries with a jointly held account. Go online and view your account title.
Anonymous   |     |   Comment #16
Go online and look at the application. It says for more than 1 joint owner, show the same info shown on the form. My friend has his wife as joint owner and 5 kids as POD on an existing PenFed Cert.
Anonymous   |     |   Comment #17
I've been with Penfed for years and spoke with them about this years ago. You can only have POD beneficiaries if you are an individual (single) holder of the account. If the account is jointly held by two people, Penfed does not offer the POD titling. I repeat, go online and look at your account title.If it is jointly held, you will not have POD beneficiaries listed.
Anonymous   |     |   Comment #18
I've also been with PenFed for  years. I just called PenFed. After checking to make sure , she said you can have a cert. , joint, with POD beneficiaries.Two ways to do it, when filling ouout form 688, do as it says and attach additional copies with info. requested under POD beneficiary OR you can also do this on signature card they send after opening the certificate. The example I gave was with 5 kids as POD. So either you were misinformed, you misunderstood or it has changed, but you can do it  today.

Perhaps the online thing you talk of just has line for the first two owners? I looked at mine online, but I don't have POD's like my friend.

lou   |     |   Comment #19
Correct, the beneficiaries for a joint account do not show up online but the C/R is able to see it if you have beneficiaries. Just complete Form 771 and add a joint owner and beneficiaries to the certificate and mail or fax it to the correct dept at PenFed.

To answer the other question, if one of the owners on a certificate with a joint owner dies, the entire interest is transferred to the remaining owner regardless if there are beneficiaries on the certificate.
Anonymous   |     |   Comment #23
Not meaning to add to any confusion here, but the instructions to Form 686, Money Market Share Certificate Agreement, clearly states -  "If you have designated a beneficiary (Payable-on-Death account), please sign as an individual account".  Is this another way of saying that a joint account can not have POD's? It sure looks like it, or at least it is easy to see why there may be some misunderstanding in this regard, including on the part of the CSR's. 
Anonymous   |     |   Comment #27
It certainly appears from that instruction that only individual account holders and not joint account holders can designate POD beneficiaries.
paoli2   |     |   Comment #20
When I called Penfed this week the rep told me the 3% rates should last until 12/31/13.  She didn't know what they would be on the 1st. 
Anonymous   |     |   Comment #21
From all the comments It appears that everyone is required to fill out forms either on-line or in paper form.  Penfed will accept them either by email, fax or snail mail.  What I would like to know is, does the Customer ever receive a completed copy from PenFed of the forms that you filled in to keep if there is a descrepancy in the future?  Or, is everyone relying on copies made before mailing?
paoli2   |     |   Comment #22
#21  After I return all necessary signed copies to PenFed, they usually mail me a copy for our records showing the CD or CDs purchased with the info.  I also go online and print out the page listing all the CDs with shows everything needed, CD number, names, rate etc. and keep that copy also. 
Anonymous   |     |   Comment #24
I found the following disclosure on Penfed's website:

"Note that any IRA Certificates opened or renewed prior to September 1, 2007, can be redeemed before maturity without a penalty, if the Member is at least 59 1/2 years old. A penalty will be imposed for early redemption of an IRA Certificate that was opened or renewed after September 1, 2007, regardless of the member's age. This fee could reduce your earnings.

Can anyone find the disclosure statement that states Penfed allows early withdraws from IRAs after a person is 70 1/2?

Anonymous   |     |   Comment #25
I do not see this about prior or post rules on Sept 1 2007 and under item g it does not dictate any rules. If your over 59.5 years old you can take it all out except for $1000. Period.    Most institutions allow penalty free withdrawls for RMDs but the 59 and a half rule from PenFed  would cover this
Anonymous   |     |   Comment #28
I was talking to a rep yesterday, and they specifically told me the rates will be good through January.  I asked her if I heard her correctly, because I have IRA's coming due in mid january, and she said they have been told rates are good to January 31.
Anonymous   |     |   Comment #29
PenFed IRA CD's allow partial withdraws and transfers penalty free as long as $1000 remains in the original IRA CD and you are over 59 1/2.  By "transfers" I mean you do not have to take a normal distribution from your IRA, but simply transfer money from your IRA CD earning a lower interest rate into a new IRA CD earning a higher rate at PenFed.  It is like having a step-up CD.  So it makes sense to me to take out a 5 year CD and not worry about rising interest rates, because I can reinvest anytime at the higher rate offered by PenFed.  I did this with two IRA CD's I had at PenFed recently to get the 3.02% rate.  You need to fill out PenFed's Form 735 and attach a letter explaining your intention to take a partial withdraw to invest in the specified CD you wish at PenFed making sure it is a transfer and not a normal distribution to maintain the IRA status.  It is a very nice feature!   Moderator Note: Please refer to post for an update on this PenFed IRA CD policy.
Anonymous   |     |   Comment #30
Based on Comment #29 and a phone call to PenFed, I sent(fax) in the form 735 and a letletter on my IRA and on my So's IRA to do this "Transfer" on Jan. 6, 2014.. I just received an e-mail telling me to call. The CSR told me this is no longer allowed as of a Dec. 17 memo sent out to staff. If someone wants to "transfer" they must close the certificate and pay the penality to open a new certificate at a different rate/term.

I was going to reap an extra $2250 per year for 2 1/2 years! DARN!!!!
lou   |     |   Comment #31
#30, are you over 59.5 and were you willing to leave $1,000 in your IRA CD. This definitely wouldn't have worked for your son.
Anonymous   |     |   Comment #32
Yes, I am over 50 1/2, and by SO I meant spouse, and they are over 59 1/2 also. Ken is checking with his PenFed contact and should be posting on this after verifying what I was told.
Anonymous   |     |   Comment #33
I meant I am over 59 1/2, not 50 1/2. Darn fat fingers!
lou   |     |   Comment #34
If you are trying to do a partial withdrawal from your IRA CD and then depositing the money in a new Penfed IRA CD, then the process you were instructed to comply with is incorrect. You are not transferring or withdrawing the money from your IRA. The money remains in your Penfed IRA account and is used to simply open a new CD. Using Form 735 is incorrect, as you are not distributing or transferring money out of your IRA account.

Having said this, what the CSR told you is wrong unless they changed the policy. They need to amend their IRA agreement, which they haven't done as of yet.
lou   |     |   Comment #35
The language for waiving the EWP could be interpreted to mean only for qualified distributions from your IRA, which would exclude the type of scenario you're attempting to do.

So if you want to make a  distribution from your IRA account and roll it over to another institution, you would be allowed to do a partial withdrawal without penalty from your IRA CD.
lou   |     |   Comment #36
I just looked at the IRA Agreement and it doesn't say anything about qualified distributions. So I think you should be able to do a partial withdrawal without the penalty.
paoli2   |     |   Comment #37
I think this is according to where your IRA is.  I have had certain banks allow us to take withdrawals out once we became 59 1/2 without penalties and the brokerages say "no can do".  With RMDs even the brokerages won't let us break  a CD to take out the distribution.
Anonymous   |     |   Comment #38
Try this:  Take a distribution from your Penfed IRA account and transfer it to another institution into a ira savings account.  Wait 1 day then initiate a transfer from the other institution to Penfed as a new IRA CD with the higher rate.
Anonymous   |     |   Comment #39
I think you can only do this one time a year. Check your

IRA rules before trying this.
Anonymous   |     |   Comment #40
Look up the difference between trustee-to-trustee transfer VS. Rollover.  I stated "transfer".