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Survey of the Best CD Rates for February 21, 2014


Survey of the Best CD Rates for February 21, 2014

Treasury yields didn’t change much for the week. Some weak economic reports continue to push down yields, but there is still uncertainty about how much of the weakness is weather related.

For CD rates, there were more disappointments this week than encouraging signs. Three internet banks cut their CD rates.

EverBank’s 4-year and 5-year CD rates fell by just under 10 basis points. The 5-year CD now has a 2.04% APY.

AloStar Bank of Commerce cut its rates by 10 basis points. Its 1-year CD rate was near the top of my list, but it’s now near the bottom with a 1.00% APY.

Bank5 Connect reduced its 24-month Investment CD rate from 1.25% to 1.20% APY. The bank ended its 36-month Roll-Up CD. This is now just a regular 36-month CD. The Roll-Up CD had some useful penalty-free early withdrawal features. The new 36-month CD rate of 1.30% APY is nothing to get excited about.

Bank5 Connect’s 24-month Investment CD continues to have a very nice feature. It allows additional deposits of any amount at anytime during the term of the CD. So even with the lower rate, this is a good deal. Just open it with the minimum $500 deposit, and if rates hold steady, you’ll have a good deal on this CD in one year. It’ll be like a 1.20% 1-year CD.

There was one bright spot for the nationally available CDs, but there’s a big caveat. The bright spot is a new CD special from Fort Knox Federal Credit Union that has a 2.05% APY on a 46-month term. The caveat is that Fort Knox is infamous at DA due to it increasing the early withdrawal penalty on existing CDs.

Local CD Deals

There weren’t many rate changes on the local CDs.

Northwest Community Bank in Connecticut ended its 1.25% 18-month CD special.

SACU in San Antonio raised its 7-year and 10-year CD rates by 10 basis points. Its 10-year CD rate is now 2.90% APY for a $90K minimum deposit.

I added two new local deals. Both are from credit unions.

First, Generations Federal Credit Union in San Antonio is offering a 14-month CD special with a 1.60% APY for a $100K minimum deposit and 1.50% APY for a $10K minimum.

Second, Transportation Federal Credit Union in Washington, DC is offering a special 3-year CD with a 2.00% APY.

Long-Term CD Break Strategy

For the short-term CDs in my lists, you might notice CDs with the note "5-year CD closed after X years". These take into account the yield after the early withdrawal penalty is applied.

If you want to compare the effective yields of other CDs after the early withdrawal penalties, please refer to our CD early withdrawal penalty calculator.

The risks of planning for early withdrawals of long-term CDs were highlighted by the deposit agreement change at Ally. The risks have also been seen at credit unions which have raised the early withdrawal penalties on existing CDs. I have more details in this blog post.

Note About the CD Survey

As I described in my rate table overview, you can use our CD rate tables to find the best rates for both nationally available CDs and local CDs. This CD survey blog posts are intended to highlight nationwide CD deals that may not be apparent in the tables. For example, I'll include the post-penalty yields of a few long-term CDs.

The CD survey blog posts are also intended to highlight the local CD deals that are available in large metro areas. There are many high CD rates, but most of these are at small banks in rural areas or at small credit unions with very narrow fields of membership. In these local CD surveys, my focus is on local CD deals that are in big cities or that are available in large areas of a state.

Yields Accurate as of February 21, 2014

Under 1-Year CD Rates

EverBank1.10% checking/MMA intro 6-month rate ($100K/$50K max)account review
Connexus Credit Union1.00% 6-month CDw/active chk
Doral Direct0.91% 9-month CDaccount review
Bank5 Connect0.90% 6-month CDNot available to MA & RI residents
CapitalSource Bank0.90% ($10K) 6-month CD special
Doral Direct0.87% 6-month CDaccount review
Ally Bank0.87% 11-month No-Penalty CDsee account review

Noteworth Local Deals

HomeBanc1.50% 3-month CDCentral and West Central FL
Gulf Coast Federal Credit Union1.10% 6-month CDCorpus Christi, TX metro
Roma Bank1.05% 6-month CDparts of New Jersey
Doral Bank NY1.00% 6-month CDNYC

1-Year CD Rates

Pentagon Federal Credit Union1.16% 1-year CDaccount review
Melrose Credit Union1.10% 1-year CD
Connexus Credit Union1.10% 1-year CDw/active chk
CIT Bank1.05% ($25K min)add-on & bump-up 1-year CD
CapitalSource Bank1.05% ($10K) 1-year CD special
AmTrustDirect1.05% 1-year CD
DollarSavingsDirect1.05% 1-year CD
GE Capital Retail Bank1.05% ($25K min) 1-year CDFormerly MetLife
AloStar Bank of Commerce1.00% 1-year CD
Ally Bank0.99% 1-year CD60-day early withdrawal penalty

Noteworthy Local Deals

Generations Federal Credit Union 1.60% ($100K) 1.50% ($10K) 14-month CDSan Antonio, TX metro
Gulf Coast Federal Credit Union1.50% 12-month CDCorpus Christi, TX metro
MountainOne Bank1.30% ($130K max) 13-month CDParts of MA and VT
South Florida Federal Credit Union1.26% 1-year CDSouth Florida
LOMTO Federal Credit Union1.20% 1-year CDparts of New York City
Doral Bank NY1.20% 1-year CDNYC
United Legacy Bank1.15% 11-month CD specialCentral FL
HAB Bank1.15% 1-year CDSouthern California
Beal Bank1.11% 1-year CDSoutheast FL
HAB Bank1.10% 1-year CDNYC metro

18-month CD Rates

Xceed Financial Credit Union1.50% 17-month CD
Barclays1.43% (2.15% 5-year CD closed after 18 months)see review & risks
Ally Bank1.16% (1.60% 5-year CD closed after 18 months w/new ewp)see review & risks
GE Capital Retail Bank1.15% 15-month CD specialFormerly MetLife
AloStar Bank of Commerce1.05% 18-month CD

Noteworthy Local Deals

Gulf Coast Federal Credit Union1.65% 18-month CDCorpus Christi, TX metro
University of Iowa Community Credit Union1.45% ($250K) 1.35% ($100K) 1.25% ($1K) 18-month CD specialmany Iowa counties
Doral Bank NY1.25% 18-month CDNYC
NEFCU1.20% 20-month CDLong Island, NY
ABNB Federal Credit Union1.10% ($100K) 15-month CDNorfolk/Virginia Beach metro

2-Year CD Rates

Barclays1.61% (2.15% 5-year CD closed after 2 years)see review & risks
Northrop Grumman Federal Credit Union1.40% ($40K) 1.25% ($2.5K) 2-year CD
Melrose Credit Union1.36% 2-year CD
Ally Bank1.27% (1.60% 5-year CD closed after 2 years w/new ewp)see review & risks
Connexus Credit Union1.30% 2-year CDw/active chk
Pentagon Federal Credit Union1.26% 2-year CD
Bank5 Connect1.20% add-on 2-year CDnot available to MA & RI residents
CIT Bank1.20% ($25K min) add-on & bump-up 2-year CD
AloStar Bank of Commerce1.15% 2-year CD

Noteworthy Local Deals

Gulf Coast Federal Credit Union1.75% 2-year CDCorpus Christi, TX metro
NavyArmy Community Credit Union1.70% ($100K) 1.40% ($1K) 2-year CDCorpus Christi, TX metro
Doral Bank NY1.45% 2-year CDNYC
LOMTO Federal Credit Union1.45% 2-year CDparts of New York City
BrightStar Credit Union1.25% 23-month CD (+0.25% w/chk relationship)parts of Southeast FL

3-Year CD Rates

Wilshire State Bank2.28% 3-year installment savings account w/auto xfers, $100K maxaccount review
Barclays1.79% (2.15% 5-year CD closed after 3 years)see review & risks
Connexus Credit Union1.75% 3-year CD w/active chk
Melrose Credit Union1.61% 3-year CD
Northern Bank & Trust Company1.60% 3-year CD
Navy Federal Credit Union1.55% ($100K) 1.50% ($20K) 3-year CDlimited membership
Pentagon Federal Credit Union1.51% 3-year CD
Intervest National Bank1.45% 3-year CD
Bank5 Connect1.30% 3-year CDnot available to MA & RI residents

Noteworthy Local Deals

NavyArmy Community Credit Union2.05% ($100K) 1.75% ($1K) 3-year CDCorpus Christi, TX metro
Spokane Teachers Credit Union (STCU)2.02% ($25K) 30-month CDWA State & parts of ID
Gulf Coast Federal Credit Union2.02% 3-year CDCorpus Christi, TX metro
Transportation Federal Credit Union2.00% 3-year CDWashington DC metro
Jeanne D'Arc Credit Union1.65% 30-month CDparts of MA and NH
ABNB Federal Credit Union1.60% ($100K) 39-month CDNorfolk/Virginia Beach metro
LOMTO Federal Credit Union1.60% 3-year CDparts of New York City
Doral Bank NY1.60% 3-year CDNYC
Department of Commerce FCU1.55% 3-year CDWashington DC

4-Year CD Rates

Navy Federal Credit Union2.05% ($100K) 2.00% ($20K) 4-year CDlimited membership
Fort Knox Federal Credit Union2.05% 46-month CDConsumer-unfriendly history, see review
NASA Federal Credit Union2.00% 49-month CD special
Barclays1.88% (2.15% 5-year CD closed after 4 years)see review & risks
Melrose Credit Union1.86% 4-year CD
GE Capital Retail Bank1.80% ($100K) 1.70% ($2K) 4-year CDFormerly MetLife
San Diego County Credit Union1.80% ($90K) 4-year CD
Pentagon Federal Credit Union1.76% 4-year CD
CIT Bank1.75% ($100K) 1.65% ($1K) 4-year CD
Nationwide Bank1.72% ($100K) 1.67% ($500) 4-year CD
Communitywide Federal Credit Union1.70% 4-year CDaccount review
Barclays1.65% 4-year CD
Intervest National Bank1.65% 4-year CD
EverBank1.55% 4-year CD
Ally Bank1.30% Raise-Your-Rate 4-year CD

Noteworthy Local Deals

Bank of Utica2.25% 4-year CDCentral New York
Institution For Savings2.00% 4-year CDparts of MA
Bayer Heritage Federal Credit Union1.89% 4-year CDparts of WV, OH & SC
Department of Commerce FCU1.80% 4-year CDWashington DC
MidFirst Direct1.75% 4-year CDAR, AZ, CA, FL, MO, NH, NV, NY, OK, TX, and WY
LOMTO Federal Credit Union1.75% 4-year CDparts of New York City
Police and Fire Federal Credit Union1.75% 4-year CDPennsylvania
HAPO Community Credit Union1.70% 4-year CDall of Washington State
Doral Bank NY1.65% 4-year CDNYC
Fifth Third Bank1.50% 4-year CD specialseveral eastern and midwestern states

5-Year CD Rates

Navy Federal Credit Union2.55% ($100K) 2.50% ($20K) 5-year CDlimited membership
Stanford Federal Credit Union2.27% ($100K) 5-year CD, requires chk w/ddaccount review
CIT Bank2.20% ($100K) 2.00% ($1K) 5-year CD
Barclays2.15% 5-year CD
iGObanking.com2.15% 5-year CD
GE Capital Retail Bank2.15% ($100K) 2.00% ($2K) 4-year CDFormerly MetLife
Melrose Credit Union2.12% 5-year CD
GE Capital Bank2.05% 5-year CD
San Diego County Credit Union2.05% ($90K) 5-year CD
State Farm Bank2.05% 5-year CD, 2.10% IRA
State Bank of India - New York2.05% 5-year CD
EverBank2.04% 5-year CD
Pentagon Federal Credit Union2.02% 5-year CD
Fidelity New Issue Brokered CD1.95% 5-year non-callable CDissued by GE Capital Retail Bank

Noteworthy Local Deals

ABNB Federal Credit Union2.60% ($100K) 63-month CDNorfolk/Virginia Beach metro
Bank of Utica2.50% 5-year CDCentral New York
American Airlines Credit Union2.47% 5-yr/1.46% 2.5-yr CD ladderlimited membership
Progressive Credit Union2.32% 5-year CD (NYC with unique FOM)account review
Northwest Community Bank2.28% 5-year CDparts of Connecticut
MidFirst Direct2.25% 5-year CDAR, AZ, CA, FL, MO, NH, NV, NY, OK, TX, and WY
BBVA Compass2.25% (w/relationship checking) 2.00% (w/o relation) 5-year CDparts of AL, AZ, CA, CO, FL, NM and TX
Credit Union West2.20% (IRA $50K) 1.95% (non-IRA $50K) 5-year CDPhoenix metro
Bayer Heritage Federal Credit Union2.15% 5-year CDparts of WV, OH & SC
Dime Savings Bank2.10% 5-year CDNew York
Department of Commerce FCU2.10% 5-year CDWashington DC

Over 5-Year CD Rates

Fidelity New Issue Brokered CD3.30% 10-year non-callable CDissued by GE Capital Bank and GE Capital Retail Bank
Navy Federal Credit Union3.10% ($100K) 3.05% ($20K) 7-year CDlimited membership
Navy Federal Credit Union2.75% ($100K) 2.70% ($20K) 6-year CDlimited membership
Fidelity New Issue Brokered CD2.65% 7-year non-callable CDissued by GE Capital Retail Bank
Apple Federal Credit Union2.60% 10-year CD
Pentagon Federal Credit Union2.27% 7-year CD
Apple Federal Credit Union2.20% 7-year CD
Intervest National Bank2.07% ($95K) 2.05% ($2.5K) 10-year CD
GE Capital Bank2.05% 6-year CD

Noteworthy Local Deals

Hutchinson Credit Union3.15% ($250K) 3.10% ($100K) 3.05% ($25K) 10-year CDKansas
PeoplesChoice Credit Union3.04% 10-year CDYork and Cumberland Counties of Maine
Frick Tri-County Federal Credit Union3.00% 10-year CDparts of Western PA
SACU2.90% ($90K) 2.85% ($10K) 10-year CDSan Antonio, TX
Dollar Bank2.75% 10-year CDPittsburgh and Cleveland
MidFirst Direct2.75% 7-year CDAR, AZ, CA, FL, MO, NH, NV, NY, OK, TX, and WY
Franklin Federal Savings Bank2.73% 7-year CDRichmond, VA metro
Doral Bank NY2.70% 10-year CDNYC
Frick Tri-County Federal Credit Union2.50% 8-year CDparts of Western PA
MidFirst Bank2.50% 7-year CDAZ and OK
Hutchinson Credit Union2.50% ($250K) 2.40% ($100K) 2.30% ($25K) 6-year CDKansas
Wright-Patt Credit Union2.48% ($100K) 2.38% ($500) 6-year CDUS gov military and civilian personnel, Parts of OH
SACU2.40% ($100K) 2.36% ($10K) 7-yearSan Antonio, TX
Franklin Federal Savings Bank2.42% 6-year CDRichmond, VA metro
Doral Bank NY2.30% 7-year CDNYC
Fifth Third Bank2.00% 6-year CD specialFlorida

Note: All rates listed above are Annual Percentage Yields (APY) which factor in compounding.

Related Pages: CD rates
Anonymous   |     |   Comment #1
All of these rates are bellow the inflation -+ tax + devaluation of the $ = negative returns.
scottj   |     |   Comment #2
If my return is negative how is it that it generates enough to cover all my living expenses since I retired 4 years ago at 48? 
jasonw   |     |   Comment #5
scottj, I also retired a few year ago at 48, and CD income is also a big part of my income portfolio.  I would be interested to hear your story, how it's going overall etc.  Also what type of other fixed income investments you are using, % return, overall allocation, what are your other living expenses etc.    

"keeping up with inflation" is overrated, in my opinion.  As long as you don't live beyond your means, this will count just as much towards preventing your dollar from eroding.

BTW CIT 10 year brokered CD is paying 3.40%.  
Anonymous   |     |   Comment #10
The CIT 10 year brokered CD paying 3.40% sounds good, but I understand there are a lot of drawbacks to  brokered CDs.  Is this correct?
Anonymous   |     |   Comment #11
I look at brokered CD's as bonds with FDIC coverage.  I would only buy from reputable brokers like Vanguard and Fidelity.  If you definitely will hold to maturity, then the it's no different than a bank CD.  If you can't hold til maturity, then you need to sell on secondary market - that's not a bad thing esp if your CD is worth more than par.  It could also sell below par.  Like a bond, no one knows b/c depends on interest rate.  Liquidity for a CD is also not as great as many bonds.  Currently, brokered CD's paying more for long terms, and bank CD's paying more for shorter terms.  hope this helps
jib2424   |     |   Comment #16
This helps a lot.  Thank you.
scottj   |     |   Comment #22
CDs are pretty much my only fixed investments, I do have some bonds and a managed retirement portfolio, but the only thing I really count is my CDs since the others have an unkown future but have been doing very well. I am 100% debt free and that helps keeps living expenses down. For the last 15 or so years I have been very aggressive at finding the best rates, even now I have a some paying  3.5%-5%, also usually have around 20 CDs going with different maturities and having a good ladder helps me take advantage as rates rise. Also you are spot on when it comes to inflation, I have argued on some finance  forums that inflation affects people differently and this site had a link to a story last year that said that. Many big items I buy actually get cheaper and I earn enough that rises on staples like food are no big deal. I just keep my spending inline with returns, like instead of buying a $300k Ferrari I'm very happy with my $180k audi R8
jib2424   |     |   Comment #24
Do you see any CDs that are worth buying now?  I have a substantial amount of cash in a liquid cash account.  I want to buy CDs but only when I can buy some that are a really good deal.  Do you have any advice regarding whether there is something I should buy now, or should I hold on to the cash and wait for some better deals?  Thanks.
Anonymous   |     |   Comment #25
If your total net worth is large enough, then you could live on your savings without earning any interest.  Sometimes I think this is the case with some of these people on this blog.
Anonymous   |     |   Comment #31
And given that you're a non-smoker (people like yourself invariably are) :), ..............in about 3 years or so, you will move on to something else & I will be very happy to buy that Audi R8 off of you for say 40-45% of the price you paid. That's how I cope with inflation. :) Take care of my future ride now. :)
Anonymous   |     |   Comment #6
Your total income exceeds your expenses.
Anonymous   |     |   Comment #8
Depends entirely on the amount of money you are working with.
Anonymous   |     |   Comment #3
Does anyone see any CD that is worth buying at this point? 
lou   |     |   Comment #4
If you qualify, I would buy the Navy 7-year CD.
Anonymous   |     |   Comment #7
I have a 4.5% cd maturing Monday and have been thinking about doing exactly that but 7 years is a long time and I really believe rates are going to move up...... I'm thinking the 3.10% cd and closing it early if rates really move up from here.... I hate to close CDs but in this case I think I would have to.
Anonymous   |     |   Comment #9
I like your suggestion of the 7 year Navy, and I do qualify.  Will I get hurt if rates move up?
Shorebreak   |     |   Comment #12
That's why one should ladder their certificate of deposit accounts.
Anonymous   |     |   Comment #13
I do ladder them but 7 years is a little longer than I like to go especially at 3%
Anonymous   |     |   Comment #14
If you mean if rates go up to 4% or 5%  and you have a 3% 7 year the answer would be YES...hehe
Anonymous   |     |   Comment #15
This comment is for #9, sorry messed that up.
jib2424   |     |   Comment #17
That is my concern.  But on balance, I'm leaning toward buying the 7 year.  What is the general thinking regarding rates?  Will they be going up or not?  What is everyone's opinion?
jib2424   |     |   Comment #18
And if rates are going to go up, when would you guess they will go up?  And is the EWP low enough that it makes sense to but a 7 year CD at  3.1% and take that risk?
Anonymous   |     |   Comment #19
The EWP is certainly a concern but so is the possibility that an early withdrawal may not be permitted, period. Don't forger that the rules can be changed at anytime that it serves the interest of the institution as opposed to your interest.
Anonymous   |     |   Comment #20
Sorry for the spelling error....should be 'forget' and not 'forger'....my bad.
jib2424   |     |   Comment #21
I understand.  But I still don't understand how the institution can do this.  Isn't the CD agreement a contract, and if it is, how can the institution unilaterally change the terms of the contract?
hojo   |     |   Comment #48
Some agreements have clauses that the bank or CU van change terms. Ally is an example.
Anonymous   |     |   Comment #56
Thanks for this information.
Anonymous   |     |   Comment #23
The notion that savings rates must go up today, tomorrow or the near future is based on saver's exhaustion with the low rates we've seen in the last several years. However, the big question is how close are we to the next, inevitable recession? Economic growth has been sluggish, at best, but it has been growth. And at the end of every growth period is...recession. Own a 3% CD in the next inevitable recession and you might just be the envy of your neighbors...at least those with cash sitting in 0.25% savings accounts!
jib2424   |     |   Comment #26
So, should I buy the highest interest rate cds I can find, no matter how long the term is?  Such as the 7 year Navy, maybe brokered CDs.?  What does everyone think?
Anonymous   |     |   Comment #27
You have to make that decision for yourself...if you only have enough money to buy 1 cd I wouldn't blow it all on a 7 year BUT if you have enough CDs to make a ladder than that is different....you should know what is best for you, anyways by the time you make the decision to buy it or not it will be gone or it will have matured already....hehe
gregk   |     |   Comment #28
No one can really say what you should do, since most of us are just as unsure about the decisions we make for ourselves given the uncertainties of a future we can't control. The options have been pretty well laid out here, as have the consequences (positive and negative) of choosing one or another of them under different scenarios that might unfold.  The three alternative basic strategies are laddering, rate-chasing, and market-timing, - again, each with their own potential merits and demerits.  Choose one according to your temperament and hope for the best.
jib2424   |     |   Comment #29
Thank you.  I think I am a market timer since I have enough income that I don't have to ladder, that is I won't need CD maturing money at a specific time.  I am trying not to be a simple rate chaser.  What I'm trying to do is to determine how to maximize the income from the money I have built up to invest in CDs.  I could simply buy the CDs with the highest APYs, which are generally the longest term CDs, and maybe that is what I should do.  My only concern is, will rates rise during the terms of these CDs so that I would be better off to wait and buy CDs after the rates rise?  So I gues my question is:  what is your thought about whether rates will rise or fall, and when will rates rise or fall.?  No one can see the future, but I would be interested in everyone's opinion.
lou   |     |   Comment #30
jib, trust me no one on this forum, if they are being honest, has the foggiest notion what is going to happen with interest rates.

Now, I think it is safe to assume the probabilities of rates going higher rather than lower is pretty strong. However, when this might happen is anyone's guess. So you need to have a strategy for all contingencies and hope you guess right more than half of the time.

I thought gregk laid it out very well. Personally, I go long with my CD's but will not choose a bank or credit union that has any language in its disclosure prohibiting early withdrawals. I also won't agree to EWP's longer than a year.
InterestYields   |     |   Comment #80
Given the astronomical US debt & deflation concerns, low interest rates are likely to remain..

Just curious what banks are on that list Lou (no language in deposit terms to approve early withdrawals as Ally recently did & relatively small <1yr EWP's) or anyone else?
Anonymous   |     |   Comment #32
You are too paranoid.  Leave your money  right where you have it now and get some sleep until YOU make your own decision.
Anonymous   |     |   Comment #33
Allow me to add a short investing insight reminiscent of 1929 stories related to me by individuals who were there.
A middle class man is driving home from a short vacation with his middle class wife. Recently retired (aka forced downsizing), he's in a state of panic because he's disconnected from the Internet and his "trades" may be in danger. He's purchased on margin AND shorted a few stocks. The dollar amounts involved are not life threatening but his attitude may be. His wife is increasingly irritated, worried and frustrated. It's becoming a repetitive pattern of behavior .
When this story was related to me (and I know all individuals involved) I casually remarked, "he's trying to make up for lost time with high risk plays." Young investors may get away with margin purchases and shorts but, in the long run, it's a dangerous gamble many lose badly. Many amateur investors in 1929 got creamed because they were never investors to begin with. They were crapshooters, nothing more.
gregk   |     |   Comment #34
Jib, unless a deflationary scenario takes hold, overall CD rates aren't likely to decline further (though any individual institution may lower somewhat due to internal factors).  We're already at roughly net 0% over 1 to 5 year terms at the best rates offered given current government CPI numbers and reasonable expectations for a modest trend upwards during that period.  Thus the issue is how soon can we expect some material increase that might justify staying on the sidelines until it happens, and that's a speculative game the real outcome of which depends on a number of now highly uncertain variables.

Back when PenFed was offering its 3% 5 year CD's my own rather crude and simplistic decision process was as follows, -  given that staying liquid with whatever amount I decided on would result in an alternative 1% return.  I asked myself did I expect the 5 year rate to be at least 4% within 2 years, and answered no (based on several assumptions).  Then I assumed a 4% rate in years 3-5 of the next 5 years and calculated a 5 year return (on $100,000) of $14,000 (if I waited for it), versus $15,000 at 3% beginning now.  Another model assumption was an average 5% rate (in years 3-5)  resulting in a 5 year return of $17,000 (by waiting) versus $18,000 at 3% beginning now, - after taking a 1 year EWP at the start of year 3 and reinvesting at the 5% rate.  Got that everyone?

 Based on my assumptions and the math I decided on a substantial commitment to the PenFed 5 year 3% CD's as likely to provide me with the best total yield over the next 5 years.

In any case, it's a small-ball game we're engaged in here, - grounded primarily on the overriding risk averse motivation of capital preservation.  The differences in potential return whatever strategy we decide to pursue amount to likely no more than several percent under different scenarios, - probably not a make or break proposition for most of us. 

One does like to squeeze out as much as one can , of course, - but a good sleep is even more important.  
Anonymous   |     |   Comment #35
Thanks.  All of these comments are very helpful..  I'm leaning toward putting $250,000 into the 7 year Navy. Even if rates rise, I don't expect them to begin to do so until 2015.  And then the rise will probably be very gradual, maybe 1% a year.  If rates move up earlier or faster, I can pay the EWP and get out.  Does this sound like a reasonable strategy?
gregk   |     |   Comment #36

I consider the possibility that rates won't budge for far longer than we expect much greater than that rates will quickly move higher sooner than we expect.

You could wait on the sidelines for potentially a long time hoping for a better deal, meanwhile earning close to nothing, - and if the unexpected happens and rates escalate fast, simply get out and reinvest.  You'll be comforted over the EWP by higher returns to come.
paoli2   |     |   Comment #37
I don't think the banks and even most credit unions are going to be in a hurry to raise rates.  They have seen that savers will accept, even if unwillingly, the lower rates because they have no place else to go without risk.

I just bought more of the Navy FCU 5 year CDs because once you go over 5 years you hit the higher one year penalty.  The 5 year CDs just have the 6 month EWP.  If I were using this much money, I would think I would want to put at least some of it in the 5 year CDs for the lower EWP.  A one year penalty on that much money, if you wanted to withdraw it all, could be a good chunk of money to pay back.  You probably have thought about this, but I would never put that much in any one bank or cu without having several smaller CDs instead of larger ones.  We all must do what we feel is best for our needs.
gregk   |     |   Comment #38
What's funny is that a mere 2 months into my 60 month PenFed commitment I'm already feeling relieved and reassured.  If it's going to happen, one doesn't want to be shown a sucker too quickly, - and events so far leave me feeling pretty ****y.

The equities crowd must think we're pathetic.
jib2424   |     |   Comment #39
Thanks for all of these helpful comments.  I just put $250,000 into the 7 year Navy.  In January I put $250,000 into the 5 year Pen Fed.  I hope I made the right decisions in these two instances.
Hoody   |     |   Comment #40
I wouldn't feel too crazy, its the same way I went after hashing it around for a couple months.

I have one more decision to make between now and April, than I'm set till 2015, 2016, and 2021, **** 2021 seems like a lifetime away lololol.

Navy still shows the same rates, I'm debating to close the no penalty at BB&T and open another at Navy.

I too did the 7 yr with the same idea as just closing it if rates ever go past 4%, yes it would be a good  "chunk" but as a penalty you could deduct it from that years tax along with getting a higher rate that would make it back in a year.
Anonymous   |     |   Comment #41
Must one itemize deductions in order to deduct an EWP?
Hoody   |     |   Comment #42
as far as I know "no", I remember doing that one year myself and I never "itemize" it was a line item
jib2424   |     |   Comment #43
Thanks .  Is this everyone's opinion?
Hoody   |     |   Comment #44
Additional 1040 adjustments 

Did you cash in a certificate of deposit and pay an early withdrawal penalty? The IRS lets you subtract that fee here.

Its an "adjustment", not an itemized item.
Anonymous   |     |   Comment #51
Thanks.  This makes going long even more attractive: if one has to pay an EWP, it will be subsidized by the federal government by the tax code.  Am I right about this?
lou   |     |   Comment #57
"if one has to pay an EWP, it will be subsidized by the federal government by the tax code.  Am I right about this?"

No - it just offsets the interest income you would have had to recognize from the interest you lost due to the penalty. It is a wash.
Anonymous   |     |   Comment #58
What line on form 1040 is the EWP reported? Do you have to itemize to get the EWP deducted from your taxable income?
Hoody   |     |   Comment #59
?? start with #41 and read down....
Anonymous   |     |   Comment #45
My opinion, yes.
Anonymous   |     |   Comment #46
Actually I've done it before, I never looked at how my accountant claims it but I think it's just a loss.
paoli2   |     |   Comment #53
It's on Line 30 on Form 1040.  I used it for my taxes this year.  You put the amount on the line and deduct it from your income.  It even reads "Penalty on Early Withdrawal of Savings" so it's hard to miss.
paoli2   |     |   Comment #54
I don't know about anyone else but see my post below. Hoody is right.  You don't have to itemize.  It's on Line 30 of Form 1040.  I have another post about it.
hpho   |     |   Comment #49
Any interest you earn will not be insured of your initial deposit is $250,000.
Anonymous   |     |   Comment #50
Thanks, good point.  I thought about this, but thought the health of Navy was good enough to risk the uninsured interest without the NCAU insurance.  Do you think this was a mistake? 
paoli2   |     |   Comment #52
#50  There is another way around this.  If you take your interest out, monthly, yearly etc. all they will have to insure is the basic $250,000.  So you get to use your interest or put it in another account earning more interest and you don't have to be concerned that if the worse happens, it will not be insured.  Just a thought.
Anonymous   |     |   Comment #55
Thank you.
Hoody   |     |   Comment #60
thats exactly how I've been doing it all along.
Hoody   |     |   Comment #61
per NCUA estimator

CD1 245K joint, CD2 245K joint, 10k (Max) mnymkt joint =500k  (250 per joint holder)

CD3 245K POD to X, CD4 POD to X (this could be up to 250 per)

So you could have a million in one bank/CU and still be covered, you just would need to keep moving the monthly int out as it goes to the mnymkt to another bank.
Anonymous   |     |   Comment #62
Does everyone think it is best to not let the balance in any CD account (principal + interest) exceed $250,000.00?
HoHo   |     |   Comment #74
If a bank fails then you lose the interest rate on the 7 year CD.  Can a Penfed or another CU go under?  Unlikely but they can.  So if you have all your deposits in one bank and they go under you will be paid out and have to look for a place to put your $$.  A good idea would be to split the money between CU's (LIke Penfed and Navy).  Also,  doesn't the primary have to be member of the CU?  I joined via an affiliation but not my wife (She is joint). 
Anonymous   |     |   Comment #88
I have $250,000 each in Pen Fed and In Navy... I know the interest earned will not be covered by NCAU insurance.  I was thinking that taking the risk of losing the interest if either institution failed was justified by the high interest rate each institution pays.  Does this reasoning make sense?
Anonymous   |     |   Comment #66
#39, don't worry, Obama is working on a presidential decree to tax you deposits and scheme some money from you before your term is over.
Anonymous   |     |   Comment #47
Had a 4.5% mountain america cd come due today and opened a navy federal cd with it.....they said the cd rates are good until March 2nd after that they wouldn't say.
Anonymous   |     |   Comment #63
I think in a year we'll all be sorry we bought those 7 year CDs...hehe
Anonymous   |     |   Comment #64
Do you think rates will rise?
Anonymous   |     |   Comment #65
If rates do rise, can't we pay the EWP and get out without getting hurt too much?
Anonymous   |     |   Comment #67
You're coming off a 4.5% high. Rates are stuck in the quagmire of debt, deficit, low labor participation rate, low growth rates, and ever-increasing government expenditures. No one wants granny earning 5% on her lifetime of savings. Remember, she didn't build that! 
Anonymous   |     |   Comment #68
I think the way savers are treated is disgusting.  Can't we organize and get a voice in these matters?
Anonymous   |     |   Comment #69
any ideas?
jib2424   |     |   Comment #70
Every other investing group can exert pressure.  Why can't we organize savers, maybe work in conjunction with groups like AARP and put pressure on the politicians.  Janet Yellen would cave in a second if Congress put some pressure on her.
paoli2   |     |   Comment #71
#70  Been there done that.  Ken tried to organize a Savers Petition a while back but very few on DA seemed interested and others just made fun of it.  No one believed in it so we couldn't get enough backers and it failed.  I contacted AARP and politicians but AARP would not even allow me to promote it in their magazine.  Maybe now that Ken is so well known on many of the Money magazines etc. he would have a chance of them giving "him" media attention.  It needs someone of prominence to promote our predicament. 
The bottom line, imo, is that Congress knows our economy can't afford to raise interest rates at this time.  The banks aren't giving enough loans to support giving us higher rates.  This is not to say that our group should not be in the forefront of organizing and promoting higher rates as soon as they are possible.  Since we are all about CDs, what better group than DA to speak out against these horrendous low rates.  We have to show Congress and our Senators we have enough votes in our group to make a difference if they don't at least "try" to help out savers in some way.  Janet Yellen is going to do what she thinks is best for the country and raising interest rates for savers is not at the top of her agenda, imo.    Our country is in too much debt and can't afford to  pay the interest it owes on the debt at low rates.   Raising interest rates could make us financially more unstable than we are already.  This is just the way I personally feel but if our group did organize and decide to promote higher rates, I would be glad to do whatever Ken thinks is best.
Anonymous   |     |   Comment #73
Possibly Ken could take a survey on this website asking for potiental supporters of such a .Petition  If the results  show significant numbers then he can move forward.
Other petitions could be to eliminate the Fed Income tax on SS, tax credits for seniors,etc.
Anonymous   |     |   Comment #72
Because they will look at you and say the following,"You can earn between 0% and 3.3% on FDIC insured bank deposits. Inflation is under 2%.  Last year the stock market was up 30%...put your money there and stop protesting. The nation is mired in debt, millions are unemployed and you're demanding we guarantee you a higher rate of interest. Sorry, that's not going to happen.
Anonymous   |     |   Comment #76
I don't think we should be defeatist.  I like the idea of a survey on DA.  How can we get Ken to do this?
Anonymous   |     |   Comment #78
You're dreaming
paoli2   |     |   Comment #79
#76  If you would like to discuss this with Ken, you can PM him and get his opinions about what you want.  He usually replies very quickly to PMs. 
Anonymous   |     |   Comment #82
How does one PM?  I don't know what that means.
Hoody   |     |   Comment #77
Well I just opened 2 more 7 yr CD's at Navy today after closing the 1%er at BB&T. yeah I know it sounds silly, but I figured why not, as I've already made up my mind to eat the EWP IF rates climb over 4 0r 5%.

This time I took some advice and made 2 out of the one I closed like some are doing, one larger than the other, so IF I need any of it I can close the smaller one and continue getting at least 3.05 (rate) on the larger one. the smaller one gets 3% (rate).

I'm just glad its done with, been running this stuff through my mind till I was going nuts lol. Now I can relax and just let it go on auto pilot Till next year, I have one due in 2015 ,and  another after that in 2016 to go through this again.

Its not greed that made me go out that long, its just getting tiresome rolling these 1%ers over to yet another 1%er.
Anonymous   |     |   Comment #81
I agree. I think I'm going to close my one year cds and go long. Does this make sense?
Anonymous   |     |   Comment #83
Go with whatever makes sense to YOU.  Everyone's financial situation and goals are different as well as life expectancies.  We plan as best we can, but ultimately no one knows the future.
paoli2   |     |   Comment #84
No one knows the future but what we do know is our economy is not just going to take a drastic turn for the better in one year.  It's going to take time and probably a new administration to "try" to turn things around.  So to show what little faith I have in my country's leaders, "I" am grabbing all the 5 year CDs I can get that are over 2%. 
Anonymous   |     |   Comment #85
The term "new normal" is now in vogue. Those 5% CD's people lust after are probably going to be replaced by the new normal rate of 3%. People flocked to PenFed and Navy to get that rate and I know many locals who would camp out in freezing weather waiting for the bank's door to open if local rates suddenly hit 3%. I'm amazed how complacent savers are with near-zero earnings on their savings. I guess that's just another example of the new normal! 

Anonymous   |     |   Comment #86
That's today's reality.  But I really doubt:  "many locals who would camp out in freezing weather waiting for the bank's door to open if local rates suddenly hit 3%." 
Anonymous   |     |   Comment #87
Perhaps you're correct. They'd probably park the Winnebago and get a good night's sleep!
Anonymous   |     |   Comment #90
How likely is it that 5 year CD rates will go to 3%?
Anonymous   |     |   Comment #91
Not likely at all.  Penfed is reducing their 5 year CD to 1.75% for March.
Hoody   |     |   Comment #92
man that's almost a 50% drop,

I'm wondering what Navy's rates will show Monday, the rep I talked with said he wasn't sure but the rates have held for a couple months now.

I said yeah but look at PF.
Anonymous   |     |   Comment #89
I agree.  I think I'll do the same thing.  My only concern is that our leaders my **** it up the other way and cause massive inflation and the rates would go through the roof and I would be stuck with a lot of 5 year CDs paying 2%.  Is this a realistic concern?
Hoody   |     |   Comment #93
Than you eat the EWP and keep movin.........
Anonymous   |     |   Comment #94
You're right.
InterestYields   |     |   Comment #95
As I mentioned earlier given the astronomical US debt & deflation concerns, low interest rates are likely to remain..  As long as the USD remains the dominant world's reserve currency & foreigners keep buying US bonds anyway..

Just curious what banks are on everyone's list (with no language in deposit terms to deny-approve early withdrawals as Ally recently did & relatively small <1yr EWP for 5-5+ yr CDs) ?

P.S. There is asset inflation for example affecting the stock, art, bullion, certain housing markets due to Fed policy including central bank QE around the world but everyday goods inflation remains low due to the otherwise deflated global economy.  There are books that argue for the eventual collapse of the USD but it would seem there would have to be a better alternative than the impractical Gold-bullion-black markets many argue for..

Welcome your replies,