I realize that no-one has the necessary crystal ball, but since I missed the previous "peak", I'm wondering about opinions on where rates will likely go from here. I'm ready to lock in, and it seems that rates are stalled at 4.5%, but I'd appreciate thoughts.
Answers
Find a rate you’re comfortable investing in and don’t look back. Nice unicorn deals keep popping up every few weeks so you should get some chances esp with inflation going sideways.
My GUT tells me we’re not done with 5% 60 month CD’s yet. We’ll see more this rate cycle and possibly higher like the Numerica 5.25. IF inflation takes off again (rather than going sideways) I think we’ll even see 6%.
What I do is keep all the money earning interest all the time. Some in reward checking accounts for my emergency fund. Throughout the year I put the extra in a highest rate savings for gifting every Jan. or in a no penalty CD. The rest are in laddered CD's which I had been combining the last few year but because they are near the insurance limits now I am finding myself splitting them again. I started splitting a Roth IRA last week. I may not be getting a perhaps future higher rate but I feel if it is not fully invested all the time I am losing money. I have more CD's or IRA's maturing in a few months also and I may hit it lucky then if the rates are higher. But whatever the rate it will be put in a new CD.
But am afraid the market gods are aligned against us this time around, so I agree with sams1985 regarding "Find a rate you’re comfortable investing in and don’t look back."
Like people are saying, we have no crystal ball, the entire issue is little different from a gambling casino and trying to count cards. There was a time when banks were where you go to get a reasonable return (such as 5% on liquid savings accounts at all banks, more on a CD), and you left wild speculation to the stock and bond markets, where you hoped for the average of the former to be 10% and the latter to be 8%, compared to 5% at the bank, a significantly lesser return a tthe bank in trade for for safety that people who are not wealthy with money that they can gamble with need. Now, the wild speculation has been imposed on mere savers for even basic savings, on many people who might be trying to save, but, until this inflation-fighting blip we are in, could not even get a decent return, could not get anything that made then anything other than an idiot to save. And we constantly see news stories about national concerns about how low an amount of savings people have.
And so we are reduced to gambling like in a casino about whether we can get a mere 5% if we lock in our money so we can't use it for several years. And if our wild guess is wrong, we might find ourselves back getting a pidding maybe 1.5%, or less, on multiple-year CDs sooner rather than later.
when upfront gain is 3-7% for 2 years in exchange for 50% loss over next 3 years Freedom is a sure deal. Real life finances are slightly more complicated. What if by any chance one would need a mortgage or car loan from Freedom at 5-7% APR. Who then will be the winner? Freedom again, I suppose.
Freedom is peculiar example. it's signing 4.95% 60 months certificates because it's still paying to me 3.25% for next 8 months which is the same 50% loss of today's rate. However for first couple of years it provide me with 300+% of then rates, so much generously that I've taken the loan and turned it into profit from 3rd month on.
The original question was not about if composite rates over next 5 years justify today's rate.
The original question was about if today's rate provides above average return over next 5 years.
One of the offshoot answer is provided, once someone is happy and content with 4.95% for next 5 years then Freedom is a deal and dilemma is solved.
Anybody can comment on was and is.
But if someone can tell if better deal will be possible, then I'm sure that this someone would not be lurking here.
When inherited, if you die more than five years after opening your very first Roth IRA, all funds will be available tax-free to your heirs. If you die within five years of opening your very first Roth IRA (not five years from date of your death), the beneficiaries could take any or all contributions and conversions out tax-free immediately. If they then took out earnings, those distributions could be taxed if removed from the account during that five-year window. No 10% penalty would apply regardless of their ages when they take distributions because death of the owner is one of the penalty exceptions. Once it had been five years since you opened your first Roth IRA, everything could be withdrawn tax-free.
Under the SECURE Act rules, most non-spouse beneficiaries must deplete an inherited Roth IRA within 10 years of the original owner’s death, if that occurred in 2020 or later.
I have a ladder “dot plot” that spans from present day to 5 years. When one of my cd’s matures I try to fill in the ladder rung with a new cd. That being said I’m not going to sacrifice a large rate difference to go long term. I shy away from really short term cd’s also, as it becomes overwhelming to keep reinvesting them. As of now I have around 40 cd’s that when purchased ranged from 9 months to 5 years. Most are in the 15 month to 3 year range. Although I did jump on the 49 month NASA deal a couple times. My average rate is about 4.5%. Not the best but pretty good. And I have money maturing almost monthly for emergencies or large purchases. And one thing I have to keep reminding myself is, if the rates go bonkers, which they have over the last year or so, I can almost always cash out and pay the EWP which is tax deductible. It’s worked for me.
Good luck!
...Improbable...
And without specifying Deposit/Investment Time Horizon, plainly Impossible.
When Time factor is contributed, the realization that this exercise is hallow kicks in.
even if "peak" is guessed, would your Deposit be able to ride through the summits of rates?
would you need to guess today's and 5 years forward rates, or forward 2,3,4 years depending on the maturity?
I've done rough calculation showing that 5 Years CD with Mild EWP performs better than 5 Years Ladder.
It is safe to assume that 3 years CD with gentle EWP performs even better...when actively managed!
But that is contradictory to long term CDs that are intended to safely and passively ride thru peaks and shallows of rates to the average return.
The bottom line is that locking in long term at 4.5 or 6% tells nothing when and if the rates at the maturity is going to be 1 or 10%
It is not what you'll be possibly making tomorrow, it is how much you are making today, that makes you wealthier tomorrow.
(Not 6% yet, but yesterday the 4 week "coupon equivalent" was 5.9%!)
https://kindnessfp.com/medicare-irmaa-brackets/
all I wanted to say, with no disrespect, that CMB is an obscure instrument sold randomly.
" Treasury has issued CM bills to fill intramonth cash financing gaps that regular bills alone cannot fill" and "Treasury has also relied on CM bills when it is nearing the debt ceiling to help it pay the government's bills while keeping debt under the statutory limit".
there , one has to be professionally involved with Fixed Income trading or be highly trained Economist or paid Insider not to miss it.
In 99.99% it is not applicable to the participants of this forum, there nobody here should be distracted with trades not really available to DepositAccounts connoisseurs.
Let's move one, Lou, there is nothing here to prove or explain.
although entertaining to be talked about, CMB is such and obscure, random and nonrepresentative instrument that nobody should be concerned about or consider it.
after all CMB only pays cents on $100 invested, on ultra-short term basis.
there one has to reinvest coupon and principal 17+ times to approach 6+ Investment rate of return, but that return would not come from CMB because of its sporadicity.
Unless one occupies Fixed Income Desk and has Trading allocation in hundreds of millions of $$$ at JPM, GS, MS or BNP, HSBC, nobody would or should bother.
Neither, it made sense brining CMB to the attention of this forum, IMHO
But it is available few times in decade, usually around fiscal emergencies, to individuals willing to invest time and attention!
FYI, it appears that 161Day CMB will be actioned on 5/30, CUSIP 912797FJ1,
There anyone can discuss competitiveness of CMB against T-bill and direct their brokers
peer-to-peer, overnight, interbank and totally irrelevant to 5 Year CD Rates.
Treasurydirect, Auctions/Upcoming Actions
Any Broker Fixed income(Bond)/Resource Center, Screen(Search)/Treasury Action
Counter question...why Brokers would show/allow trade of CMB, 13 and 26 week Bills auctioned on 5/30, but no 4 weeks set to be auctioned on 6/1?
Now you never CD's for days or a month. I think 3 months is the shortest time span I have seen a CD for in the last few years. Like I have had 2 10 year CD's mature 2 summers ago and now when I ask no one want to sell 10 year CD's.
People that live off interest or people like me that save and compound interest it is great. I had a loan officer in credit union when I had to go into his office this month to close my savings account, and he asked me why I was closing my account and I said your rates and he is using Ken's site now. He actually brought up Ken's site in his office and I started to answer his questions. He got up from his chair and said sit in my chair and show me how.
The appliance salesman at Lowes that I purchased a new microwave from this week after dealing for a lower price to match someplace else asked me about Ken's site after he said he was saving for graduate school. So savings rates came up and he brought it up on my phone and wrote things down. He actually went on line and started to open an account that night he said when I next saw him and now he was earning a much higher rate of interest. I always tell people of this site and other sites for shopping, getting the ads etc. 3 people in May that I told about this site. The manager of my credit union when she matched my rate from some other place also knows of the site. Their computer could not go to Ken's site and she used my phone to bring it up and could bring up and could then verify the rate of the place they were matching. So the manager, the girl in the office, another girl came in and a guy also while we were talking so 4 people from that credit union know of it. So that is 6 this month.
4, 8, and 17 week scheduled to be announced on Tuesday May 30. Will show available then for June 1 auction.
except that 17 week is set for May 31 auction which gives less than a day to set the trade thru Brokerage, 1.5 days for 4 and 8 week Bills.
If I ever attempt to summarize this mess;
Treasurydirect follows scheduled auctions up to 8 in advance, Brokers follow announcement up to half a day in rush.
Treasurydirect does not allow CMB transactions because it's unscheduled, Brokers will accommodate CMB trades once auction is announced.
Exactly why i stay away from this.
In general, Fixed Income has to be automated, preconceived and well funded, sadly something not suitable for my PC.
BTW, I suppose DC just taken care of upcoming 4 week Bill? Craze is over, albeit in short term?