Strategy And Timing For Moving Laddered Cds To Vanguard Brokered Cds?

alaska | Nov 13, 2022 | 3 posts since 2019

I've got a set of CDs laddered over 5 years at various banks and CUs.

I'd like to simply my record keeping and rates-chasing efforts by moving all of my CDs to my Vanguard Brokerage account

It looks like I will easily come out ahead on all of my CDs, except one, if I take the early withdrawal penalties and invest them in brokered CDs with similar maturity dates.

With interest rates going up, I'm wondering about the timing? Should I replace my ladder right now, or park the money in a 3.57% (annualized) money market and then set up my ladder when rates appear to have peaked?

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Answers

sams1985 | Nov 14, 2022 | 781 posts since 2022

They have not peaked yet (IMHO) but will peak sometime in the coming months. If you have 100k+ i recommend going with fidelity and buying the FZDXX fund ad interim. Current 7 day yield is 3.75% and rising rapidly. I initially opened a vanguard account but did not like the interface or customer service.

chaser14 | Nov 15, 2022 | 61 posts since 2019

Good idea. Great rate. I have an account at Fidelity with bank accounts linked ready to buy CD’s when we feel rates have peaked but this would make buying a CD on Fidelity a lot faster than waiting for an ACH to go through.

SouthernGirl | Nov 13, 2022 | 210 posts since 2022

alaska,
Great question. I would read Truth in Savings Disclosure for each financial institution and determine if EWP is taken from dividends only, and not principal. Some institutions do not reduce principal. If so, you can usually withdraw interest paid and accrued interest before maturity, check closing withdrawal amount and possibly close CD with no EWP. I would carefully review each CD and minimize or eliminate EWP. At that time, you could deposit funds into your Vanguard money market account and decide how and when to invest as the rates continue to peak.

w00d00w | Nov 14, 2022 | 360 posts since 2012

a couple of side "timing" issues. if these CDs are held in a taxable account and the early withdrawals are completed before end of 2022, then you'll be able to get credit for the EWP with the next tax filing. if waiting until early 2023, then won't get tax credit for loss until '24. it's a minor factor, but perhaps worth considering.

another is the time it takes to move money from various outside accounts to the brokerage account. if they're not already electronically linked, and you want to pull the funds to the brokerage, that could take a little while to setup, maybe a week or so. once the money is pulled to Vanguard, should be available to invest, but not withdraw, right away.

i don't have any advice to offer regarding timing of brokered CD purchases. we'll only know in hindsight when the "right" time to purchase was. I would just recommend reading Ken's weekly CD rates blog post to gain insight into the CD marketplace.

alaska | Nov 23, 2022 | 3 posts since 2019

Thank you all for your answers.

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