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Choices Of Cds?

saver42
  |     |   32 posts since 2019

The rates will probably drop tomorrow when business starts up again, but if they don't, what would you folks do? This would be for IRA money in January.

#1) 2.5 years @ 5.48

#2) 5 years @ 4.85

I did the math. If I went for the 2.5yrs @ 5.48%, then to "break even" with the 5yr option, rates 2.5 years from now would have to be at least 4.25% for the other 2.5yrs.

What do you think? Better to do 5yrs @ 4.85 or take a chance for 2.5yrs @ 5.48? Do you think rates for a 2-3yr CD 2.5 years from now will be at least 4.25%?

Also:

Would you bother setting aside $500 of the IRA money to open a "foot-in-the-door" CD that's 5yrs @ 4.688% but allows Add-Ons? (for yearly contributions, not rollovers from other places).

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Answers
JeffinEasternFL
  |     |   744 posts since 2020
perhaps break it up into a 3, 4,5 yearish ladder? putting 40% out longest, 35% mid and 25% shortest. Hedges you if rates remain same or go up but, leaves you a guarantee of having more money at a higher overall rate, you should be able to get 5% + APY in all 3 situs...no one (accurately) predicts mid-long-term rates, it's all a guess as things "change" economically, politically, geographically.
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gratitudecd
  |     |   83 posts since 2022
I agree JeffinEasternFL
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gratitudecd
  |     |   83 posts since 2022
I would do 5 4.85% although I did a 5.6% 36 month IRA - so having second thoughts that I should have done longer back in November tbh
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saver42
  |     |   32 posts since 2019
Thanks. Still trying to decide what to do though.

But I just noticed there was an article in tne NY Times the other day that quotes Ken:
"Now May Be the Time to Lock In High Interest Rates on Your Savings"
https://www.nytimes.com/2023/12/29/your-money/savings-interest-rates-cd.html
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w00d00w
  |     |   360 posts since 2012
instead of playing the guessing game about where CD rates will be in 2026, could consider putting half of amount to invest in 2.5 year and half in 5 year. in the process, giving up both the best and worst possible outcomes should CD rates stay higher for longer or plummet. increasing your future options by opening a 5 year Add-On CD for $500 sounds reasonable.
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gratitudecd
  |     |   83 posts since 2022
Aren't all IRA CD allow add-on's to a CD? At least what I thought however I'm sure it's incorrect. Would be nice if they allowed a 5 year add-on CD for general money non IRA. Which bank or Credit Union is offering this saver42?
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saver42
  |     |   32 posts since 2019
Most places do not let you add onto an existing CD, even an IRA CD. Only a few places will.

SchoolsFirst FCU lets you add to their IRA CDs at any time -- but only up to whatever year you're in's contribution amount max (you can't add rollovers).

NavyFed "usually" allows you to add to your IRA CD too, but only from January to mid-April each year, and it's not guaranteed -- and their rates are pretty low, only 4% for a 5yr (vs 4.688 for SchoolsFirst 5yr w/Add-On, or other CUs that are 4.85% for 5yr without add-on).

As far as the "5yr or 2.5yr?" question, I DO have 2 "buckets" to use -- my new 2024 contribution, plus a rollover later in January -- it's just by the time the "rollover" money gets moved it might be Feb and rates might've lowered even more. Sigh, I hate moving IRA money, but it's even more precious to have at a better rate :)

Thanks everyone
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CDmanFL
  |     |   286 posts since 2019
Saver,
You’re right about Navy’s “usual” policy and I wish they would get back into the CD game. They sucked me in good when rates were going up and I didn’t have the patience or wisdom to wait so I locked in a substantial amount in a bunch of 5 year CDs in the low 4% range. With their 12 month penalty, I’m stuck. And angry at myself. But I keep reminding myself that it’s a good problem to have. I think most of us here have “problems” others would happily trade for. Thanks to our beloved Ken, we’re doing good my brothers and sisters so here’s to a happy, healthy and wealthy 2024! And hopefully Navy will reward us with some juicy CD specials soon (well, at least we can hope).
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gratitudecd
  |     |   83 posts since 2022
Thank you saver42
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