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CD Rates Going Up Or Lock In 2 Years At 2%?

djc314
djc314   |     |   13 posts since 2010

I have a 2 year CD I opened in St Louis coming due this week. The Credit Union has reached out to me offering to renew it for another two years at the same rate of 2%. I am tempted as the listings on this site still show 2% has a great rate. But it does look like over the last several weeks rates are on the rise. What do you guys think?



Answers
Raz
Raz   |     |   4 posts since 2017
Bellco CU (Colorado, but available nationwide) has a 22 month at 2.05% (10k) or 2.15% (100k) or a 44 month at 2.35% (10k) or 2.45% (100k). Each of these are variable rate, so the rate could go up or down. Last week, the rates went up by 0.25% in response to the fed rate increase. In the event they go down or someone is running a really great special, the early withdrawal penalty is only 90 days.

The early withdrawal penalty calculator suggests that the 44 month and 22 month have nearly identical yield at the 22 month point. The 44 month @ 2.45% APY minus 3 months interest yields 2.15% at 24 months, which is the same yield as the 22 month. If you think there is a chance that you will want to leave it longer, it's all upside after 24 months.

Getting started with Bellco is a bit of a pain. Supposedly they are upgrading their systems in August, which they think make things better.
Sylvia
Sylvia   |     |   78 posts since 2012
Published rate for 2 year at this CU is .70%. Boo on that but yay on the 2.0% exclusive they're offering. If it works with your CD ladder and CU has been okay, I say go for it. It’s more than a solid bird in hand.

By contrast, I just had a 2 year that was earning 2.0% mature. Current rate is 1.6% In response to my earlier email instructing CU to transfer funds to savings at maturity, I got a call inquiring about my plans for money. I said I’d be shopping them. They suggested I keep funds in their highest earning liquid account, which has tiered rates that start at .02% and max out at .90%. No thanks.
Anon456
Anon456   |     |   131 posts since 2011
my guess is to renew for the 2 years. You may find a special that is higher, but maybe for a longer period.

Which credit union in STL. I do not show it??
djc314
djc314   |     |   13 posts since 2010
Nearly two years ago you opened a First Community 24-month certificate of deposit at 2.00% Annual Percentage Yield. This is a great rate and is still well above what other financial institutions are paying today. We truly appreciate your business so we would like to personally extend an opportunity for you to renew your CD at the same attractive 2.00% APY.

Currently, your certificate is set up to pay out at maturity and will be deposited into your savings account on the maturity date. However, if you would like to take advantage of this exclusive offer, you can automatically renew your CD, plus you can even add additional money! Your CD is maturing this month, so please contact us within 10 days after your maturity date to take action. There are three simple options:

Reply to this email at memberservice@firstcommunity.com indicating that you would like to renew it. Please give instructions if you would like to add additional money and whether you want to reinvest any dividends earned on your current CD.
Stop by a local branch and bring this letter showing your offer.
Call our Member Service Center at 636-728-3333 or 800-767-8880.

Once we hear from you, we'll do the rest!

Sincerely,

Glenn D. Barks
President & CEO
First Community Credit Union
Kaight
Kaight   |     |   128 posts since 2011
I did two years at 2% back in the spring. But it was IRA money and I only had 60 days to re-invest it.

So how about now? Well, the smart people think there could be one more Fed rate hike in 2017. If I had money now I might put some out at 2% for two years, but I would not put it all out. I would not bet the farm. Two years seems to me a long time.
HollyHolly
HollyHolly   |     |   15 posts since 2015
Be aware that you only have 60 days to reinvest IRA money once every 12 months. The IRS changed the rules about 1 1/2 yrs ago. Now you have to transfer custodian to custodian and cannot take possession of it and then reinvest it except for 1x every 12 months.
Kaight
Kaight   |     |   128 posts since 2011
Good post, HollyHolly; thank you. Yes, I was aware of that. I am fortunate always to have had my IRA funds in but a single lump. It is a small amount of money anyway, but having everything together has simplified things for me over the years. I never worked long enough to have built up much of an IRA, but I did "Roth" what little I had back when the IRS offered their special tax break years ago. That has worked out well. The idea of forced withdrawals, i.e., MRDs, never appealed to me;  annoying, intrusive, and too messy.
peacejogger
peacejogger   |     |   21 posts since 2011
I would also renew for the 2 years at 2%. Trying to guess what rates are going to do is pretty much a fool's game since there is no way to know what is going to happen tomorrow or any other time in the future. We may be seeing better rates in 6 months time but could just as easily be seeing worse.
Bozo
Bozo   |     |   763 posts since 2011
Peacejogger, my wife and I had a long discussion about rates and terms. By and large, we agree that going out five years is less than optimal. That said, CDs with terms at or around 2 - 2 1/2 years barely keep up with inflation. We agree that cash in our asset allocation should be riskless. We are more interested in return "of" principal than return "on" principal.

We subscribe to the somewhat antiquated "bucket strategy".
Bozo
Bozo   |     |   763 posts since 2011
Many deride the "bucket strategy" as sub-optimal. While this might be true, a potload of cash has its benefits.
paoli2
paoli2   |     |   2,394 posts since 2011
Since we live on our interest, I go with the "us" rate. The rate that will bring us in the amount of interest I need to support us without going out longer than 5 years. It also must be a 5 year CD with an EWP no longer than 6 months. I never touch those new insane 1 year or more EWPs. I also don't like a CD to have a life longer than I might expect ours to be.
Bozo
Bozo   |     |   763 posts since 2011
Paoli2, having CDs with lives longer than your life expectancy brings back fond memories of my Mom. After she hit the golden age of 90 , she never renewed any CD for a period of longer than one year. I tried to explain to her that longer CDs, with higher interest rates, could be inherited through the Trust. I finally convinced her, but it was a struggle.

I inherited that CD, seven years at 3.8%, as successor trustee. It finally matured in 2017, over four 1/2 years after she died.
paoli2
paoli2   |     |   2,394 posts since 2011
Bozo, your mom was fortunate that she left that CD to someone (you) who allowed it to mature. My concern is that the person who will probably inherit our CDs (hopefully) is going to want to cash them all in soon as she gets them! No matter what I do, she will have to face the choice of EWPS or wait until they mature and like her father, she never wants to really learn about finances.

 I tried to talk to the so called "Finance official" at our main local bank to see if they would help her after I am gone but when I heard what his idea was for what he would do with the money, I told her to avoid him! Baskets are for Easter. Not for our money!
Bozo
Bozo   |     |   763 posts since 2011
Paoli2, regrettably, there is little to protect adult children from themselves. There might be esoteric devices known only to estate planning attorneys. You might inquire of one.
Bozo
Bozo   |     |   763 posts since 2011
Paoli2, "living on interest" is more common than thought. Even those whose monthly budget is established by RMDs, often supplemented by non-RMD withdrawals, annuities,  and pensions (including Social Security), are often reliant on after-tax CD interest to "balance the budget".