Closing Cds Early

jack12 | May 19, 2022 | 307 posts since 2021

I opened some longer term CDs at what are now unfavorable rates

They are going to cost me 6 months interest but the calculator said it made sense so i am going to do it

My question-- is there any reason to put it off or should I hurry up and close them

I was planning on a 2 year CD at 290% since the rates on 2+ year treasuries are not competitive right now - apparently, they were 295% briefly but I did not see them

(I did not check today or yesterday)

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Answers

MoneyMoves | May 20, 2022 | 149 posts since 2019

As you may know, at tax time, the EWP will be an adjustment to income. QUOTE: As an adjustment to your income rather than an itemized deduction, claiming your early withdrawal penalty reduces your adjusted gross income (AGI). This reduces your taxable income and, by extension, lowers the tax you owe to the government. You can claim an adjustment to income and additionally claim the standard deduction or itemize other deductions as well. This type of tax break is one of the best the IRS offers.
You will get 1099-INT that will indicate both the Penalty and the Interest Earned that the bank reported to the IRS.

Choice | May 19, 2022 | 937 posts since 2020

The effective new rate would be 290 (is that 2.90) and shouldn't one calculate the true net rate, i.e.less the 6 months ewp...that is the real final new rate I see. Why not go negotiate with current FI and see what they may do since they will have to replace your $ at a higher rate!...that would be my first...sorry, second step, after first seeing the true cost/benefit of switching! Big Foot is waiting...as am I for the those FIs who are "losing" funds b/c their rates are stagnant...which they will move if more pay ewp and move funds! Good luck!

jack12 | May 20, 2022 | 307 posts since 2021

The net rate is kind of irrelevant- the calculator says it makes sense
OF COURSE it will be less than 290% net but the fact is 290% is far above the rates on those CDs and the calculators math proves it

As for negotiating with my current FI-Hearing NO a dozen times in a row is not my idea of fun

I would rather spend my time on more productive endeavors like finding bigfoot

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