Should I Add On To A 3.25 Percent 5 Year Cd Maturing In 2024

hank
  |     |   84 posts since 2016

I have a 5 year add on cd at Freedom CU which I opened when Ken suggested it at the beginning or 2019. I do have 5 pods listed on the account and I am already over the 250 limit but I am hesitating to add more because of the pandemic and the possibility of CUs and banks going belly up in the near future because of loans going bad.. What do others think?



Answers
Kaight
  |     |   423 posts since 2011
hank:

Weiss ratings upgraded Freedom CU to an "A" rating at the end of July. Prior, just after the end of 2019, the Weiss rating had been "A-". Weiss is a VERY tough grader. At Weiss, even a rating of "C+" is not bad at all. Only the very top credit unions garner an "A" rating. NFCU (Navy Federal), for example, is rated by Weiss at "A". NFCU is the largest credit union in America.

Hence your choice of credit union is excellent. Then, in addition, you're using your PODs to add insurance you are never even likely to need. So I would say you are a "belt and suspenders" sort of person. And that is smart in these challenging times.

All of the above notwithstanding, do not ignore the following:

At some point in December new credit union ratings will emerge, the ones for Q3 of 2020. Pay attention to them. Ken will offer a new rating on Freedom. Likewise, so will Bauer and finally Weiss. Pay attention to all of them, watching in particular for any change in direction. Even though you have chosen wisely, it never hurts to keep your eyes wide open.
hank
  |     |   84 posts since 2016
Okay, I will wait till those new ratings come out. Yes, I have 5 pods on the account which should give me insurance up to 1.25 million. But has been discussed here before, you can never be 100 percent sure that if it's taken over by the ncua, will everything have been recorded properly. But they did send me something listing my account and the 5 pods attached to my account. Thank you.
me1004
  |     |   1,005 posts since 2010
If you have five PODs, you should be covered by NCUA to as much as $1 million in FreedomCU over all your accounts there. So, worst that can happen if the CU goes under is you will be cashed out and get all money in it back if covered by NCUA. That coverage is for everything you have in the CU, no matter how many accounts you have there under your name.

Meanwhile, there is just about zilch chance of getting that rate any time between now and 2024 — so max it out now. Do they have an upward limit on how much you can add and get that rate — that’s about the only question?
hank
  |     |   84 posts since 2016
they said there is unlimited add ons
Confused1
  |     |   33 posts since 2018
I tried to add to my Freedom CU certificate earlier this year and was told that their promo CD's did not allow add-ons, I checked and mine was a promo CD, Hopefully yours is not
hank
  |     |   84 posts since 2016
no, you can't add on to the promo certificate that was 3.5 percent . But Ken suggested at the time to also put a little money in the 5 year cd at 3.25 and that's what I did. It was really useful and still is when rates are cratering. I am going to wait as Kaight suggested and decide in December when new ratings are out whether to put more in
CuriousDave
  |     |   43 posts since 2018
Will the CU allow you to do an add-on if the additional amount is held in an account in your name but including one or more Pay-On-Death (POD) beneficiaries? Or will they treat that as a separate account, not qualifying for the add-on? Alternatively, if you have at least two beneficiaries in mind, ask whether you can add-on to the existing account but with the request that the account be shown as a POD account, naming each of the beneficiaries. According to the FDIC's detailed rules on their official site (shown below), it appears that a CD with one or more named POD beneficiaries will be treated as an "informal" irrevocable trust and qualify under the rules for irrevocable trusts for an additional $250K of insurance coverage for each POD beneficiary. Consider contacting the FDIC for confirmation that this will work. Of course, naming a POD beneficiary is mainly for estate planning purposes, so that needs to be considered as well.
https://www.fdic.gov/resources/deposit-insurance/brochures/documents/your-insured-deposits-english.p...
111
  |     |   156 posts since 2019
Hank - CuriousDave makes very good points, but since your account is with a credit union you'll need to research these at https://www.ncua.gov/, not the FDIC website. Most of the rules are the same, but there might be an odd one or two that aren't.
njs
  |     |   6 posts since 2019
I've added POD to my GTE account and will be making more deposits. I don't think this will be a repeat of the last recession.
me1004
  |     |   1,005 posts since 2010
One POD does not get you extra coverage, you need two for extra coverage. At least under FDIC rules you do, I think NCUA follows the same for that.
RickZ
  |     |   101 posts since 2010
I thought if you had two different ownership category accounts, one single ownership account and one POD account with one beneficiary (for example a single ownership savings account and a a POD CD account with one beneficiary), then you would be insured up to $500K for all your accounts aggregated together. Is that not correct?
blazer9
  |     |   124 posts since 2019
RickZ, NCUA, Yes. 500K correct.
111
  |     |   156 posts since 2019
RickZ and blazer are correct, but note that in this example the $500K aggregated coverage is actually made up of two $250K coverages, one for each of the two accounts. If you have a large CD (for example, Hank's is already over $250K, and growing), that CD must reside in one account or the other. If each account is only insured to $250K some of that CD will be left uninsured, even if the aggregated coverage is $500K. Having two PODs on a single ownership account will insure that all of that CD is covered.
RickZ
  |     |   101 posts since 2010
Appreciate your input 111, but I don't think that’s correct. After researching it further, I'm quite sure that in my example with two ownership category accounts you would be insured for $500K total in the aggregate across both accounts regardless of the amount in each account, not merely $250K per account.

I just saw an article that Ken Tumin wrote here in 2011 entitled “Maximizing Your FDIC Coverage with Beneficiaries.” In that article Ken states as follows:

Https://www.depositaccounts.com/blog/2011/05/maximizing-your-fdic-coverage-with-beneficiaries.html

“If the bank doesn’t allow you to divide the funds that will go to the beneficiaries in your own percentages, you can have separate accounts for each beneficiary. The FDIC will aggregate the accounts and treat them just as if they were one account. (my emphasis)

I tested this out using the FDIC EDIE calculator with a fictional scenario. In this example, Ed Jones wants to cover $1.25 million, and he wants his wife Susan Jones to be the beneficiary who will receive all of his money when he dies. He sets up 5 CDs at the bank. The first CD has a balance of $1,249,600 with his wife as a beneficiary. The other 4 CDs have balances of only $100 each, and each has a separate beneficiary that meets the requirements as described above. I took a snapshot of the output of the EDIE calculator which shows that all $1.25 million is insured.”
111
  |     |   156 posts since 2019
RickZ - Thanks for the input. However, this is a bit puzzling.

First, in my prior post I was talking more about the example mentioned in your first post, and not so much about Hank's example. I also went to the FDIC EDIE (https://edie.fdic.gov/calculator.html). Hank is using a credit union, of course, but I wanted to recreate your example using the FDIC calculator.

So I assume 2 accounts in a bank -
1) “Owner1” owns a single-owner account (“Account1”) with no beneficiaries, holding a $100 CD.
2) “Owner1” also owns a single-owner account (“Account2”) with 1 beneficiary (“Beneficiary1”), holding a $270,000 CD.

The calculator tells me that my total balance for all accounts at that bank is $270,100, but of that, $20,000 is left uninsured. What am I doing wrong? Thanks.
RickZ
  |     |   101 posts since 2010
111 - I didn't use the FDIC calculator before but I now see your point. You are right that a single owner $100 CD account #1 and single owner $270K CD account #2 with one beneficiary shows $20K uninsured.

I now see that in Ken's example all of the accounts had a single but different beneficiary. When I changed the FDIC calculator to single owner $100 CD account #1 with beneficiary #1 and single owner $270K account #2 with beneficiary #2, it shows that all $270,100 is insured.  The strange thing is that when I changed it to single owner $250K CD account #1 with no beneficiary and single owner $270K CD account #2 with one beneficiary, it shows that $500K is insured and $20K uninsured.

So it appears that while all the accounts are aggregated together and you don’t necessarily need to have two beneficiaries on the $270K CD account, you do need to have a total of two beneficiaries in any of your accounts to get the $500K insurance coverage on a single account. Strange, however, that a single owner account with no beneficiary and a single owner account with one beneficiary are considered two registrations giving each account $250K coverage, but they aren't considered two registrations when the accounts are aggregated together.

Whew! Appreciate everyone’s help in getting this nailed down as I’m about to go over my $250K limit with an add-on CD at a credit union and I only want one beneficiary on the big CD account but I want to make sure I’m covered to $500K.
hank
  |     |   84 posts since 2016
how are you going to get coverage for 500k if you only want one beneficiary on your account?
RickZ
  |     |   101 posts since 2010
Beneficiary #1 on large CD account and beneficiary #2 on checking, share or minimum amount second CD account.
me1004
  |     |   1,005 posts since 2010
Yes, I think that might be true too -- if actualy differnt registriatons. I'm not sure that one single-name and one the same name but a POD is "differnt registrations." At any rate, I believe the OP is talking of a single account only, and I was addressing that.


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