Help/Suggestions For Short-Term Deposits (No More 5Yr Cds For Me)

senda | Feb 17, 2022 | 126 posts since 2015

Hi all. For many years I've appreciated Ken's site here and used the information to open up almost exclusively long-term (5yrs+) CDs that are 3%-4% (even Add-Ons) through the years.

However as they start maturing this year thru 2024, I am now at a place where I do not want to open up long-term CDs because I will need to have my funds more liquid over the next couple years. I don't know when I'll need the funds but when I do need them, I won't be able to wait more than a couple months (not 4-5 years for them to mature). So, looking for suggestions.

(1) Of course I could put them in a higher-rate savings account (Alliant pays 0.55 currently, I know there are others that are higher). I'd be interested in hearing of other places with high liquid savings rates and people's opinions of them.

(2) If it's a fantastic deal with a good EWP I suppose I could take a chance and still open up a long-term CD and just close it out early (hoping the bank would let me do so). I would have to weigh in my mind the risk of that.

(3) I have heard in passing that Ally had (has?) low- or no-penalty CDs. What are people's experiences with them? Are there any OTHER places that offer no-penalty CDs? Your experiences with them?

(4) Any other suggestions/thoughts? Where do you put your funds if you know you might need access to them with short notice in the coming years?

Thanks!

5

Answers

enelrad1123 | Feb 17, 2022 | 75 posts since 2017

I have had good experience with the following high liquid savings accounts:
1. Connexus Credit Union is paying .85% on their money market on 100K and above. You can join the credit union by donating $5 to their association. Checks are provided for this account, but must be written for at least $250.
2. State Bank of Texas offers a jumbo money market account paying .75% with a minimum 100K deposit. They also provide checks which can be written for any amount.
3. Merchants Bank of Indiana has a money market account paying .75%. Unlike the high balances required to obtain the rates on the other accounts, Merchants only requires $50 to open the account and the .75% is paid on all balances. They also provide checks which can be written for any amount.
On all of these accounts, I like that I can simply write a check if I need immediate access to the funds and do not have the hassle of a wire or ACH. I hope this info helps. More details can be found about these accounts on Ken's excellent website!

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FirstNation | Feb 17, 2022 | 85 posts since 2021

Depending on how much money you're going to need, you could park some of that money into iBonds.
Right now, their yielding over 6% because they're linked to inflation.
You can redeem them after 1 year with just a 3 month interest penalty.
After 5 years, there's no penalty.
However, you're restricted to 10K purchases per year per social security number.
That would be 10K more if you're married.
But, you have to open a Treasury Direct account to do this.
And, up to 5K per year in paper bonds from a tax refund (which doesn't require a Treasury Direct account).
The main downside to that is if there's deflation after this big run up in inflation.
Since the current fixed interest rate on these things is zero, all you're getting interest is the inflation factor.
During deflation this mean another big fat zero percentage.
That's better than TIPS, where the value of your bonds actually decreases!

5

Choice | Feb 17, 2022 | 937 posts since 2020

Senda…my take (similar to one mentioned above) is checking acct with navy federal cu which has rates based upon tier of deposits…as I recall .45% for more than $25k…I use it but I also have several other checking accounts with large balances at other CUs. I look at the delta in rates, ie 0 rate as compared to….one is only looking at the delta given current rate environment. i also save (spend less) more now to compensate/offset lower rates, ie I pay myself more . I also use ibonds extensively and the individual Soc Sec number is not the determining factor but the type of account TD permits and each of them could be identified to one Soc Sec number but usually not, eg my TIN for my sole proprietorship. We have multiple TD accounts with some using the same number

2

Rickny | Feb 17, 2022 | 1,296 posts since 2017

Maybe open some bonus savings/checking accounts. Most require you keep the money in your account for a specfied time. Some require Direct deposits.

Your return will be better than you currently would receive on standard accounts. Maybe rates will be higher after you get the bonuses. Look at the section Bank Promotions on this site.

4

FirstNation | Apr 25, 2022 | 85 posts since 2021

With the way Treasuries yields have jumped recently one other option is to purchase some of them every month.
That way you'd have some cash available on a monthly basis.
Right now, the 12 month Treasuries are at 2%.
That's a lot better than any savings account out there.
You'll just have to slice and dice the amount you purchase each month to meet your anticipated needs.
One big caveat about Treasuries is if you have to take RMD's on your IRA accounts, you'll need to cover that somewhere else.
You don't want to be put in the position of having to sell some of the Treasuries to meet the RMD requirements.
I've got a boatload of IRA CD's maturing this year and next.
But I'm looking at purchasing some TIPS with those funds once the TIPS yields go positive (assuming they ever do).
Since we're ancient, we have to take RMD's each year.
That plus Social Security covers our expenses.
So, we can afford to buy some 5 year TIPS so that we breakeven with inflation.
I used to be able to do that with 5 year CDs.
But that's not happening this year.

2

senda | Feb 18, 2022 | 126 posts since 2015

Thanks for your posts everyone, very helpful. I'm already a member of both Connexus and Navy. I'm not crazy about reward checking accts if they require monthly purchases or other such requirements to get the rate, as some do. If they let you just park the money there without monthly actions or requirements that's fine.

Has anyone dealt with Ally or no-penalty CDs at other places?

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