How Can I Have A CD In A 401K And Still Get A Good Rate?

selfinvestor | May 8, 2015 | 3 posts since 2015

I have a CD in a 401k, and I just found out the CDs have to be brokerage CDs with a CUSIP number to be in the 401k. In comparing rates, the rates are much better for "normal" CDs than for CDs with a CUSIP. For example, 1 yr CDs on this site have 12-month rates that go up to 1.31% and include others in the 1.2% range, including IRA CDs. On Fidelity's site, the highest rate for a 12-month brokerage CD is 0.50%, and Fidelity said to be in the 401k, the CD must have a CUSIP.

Thank you!

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Answers

paoli2 | May 8, 2015 | 2,641 posts since 2011

I think you are misunderstanding what the Cusip number is. We have been with Fidelity for years purchasing nothing but their brokerage CDs for an IRA and usually the rates are just a fraction lower than outside rates. The Cusip number just indicates which CD you are buying. It has nothing to do with what kind of rate you get.

Just a hint about buying your brokerage CDs from Fidelity from my experience. It depends on what day you buy as to whether or not you get the best rate. They usually get their supply of CDs early in the week and the best ones with higher rates are grabbed up quickly. If you wait until the end of the day you may find that decent rate CD is gone and you are stuck with the lower rates. If you saw a 12 month CD on Fidelity's site for 0.50% and other sites were showing 1.31% you must have missed out on the higher rates with Fidelity. If that happens to me, I wait until the next day when they usually replenish their supply and grab the higher rated CD before they sell out. BTW, "all" of the Fidelity CDs I have purchased over many years have Cusip numbers. I don't know why the Fidelity rep told you it must have a Cusip to be in the 401K. If you look at their page of CDs they are selling which I and others buy, they "all" have Cusip numbers.

Shorebreak | May 8, 2015 | 4,039 posts since 2010

A CUSIP identifies the security. It may well be a bank CD via the broker rather than directly with the bank. That usually also means you could sell them on the secondary market. I don’t know how you could have a CD from a bank or credit union put into your 401k account unless it’s a brokered CD. In this case through Fidelity.

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