5 Year CD At Navy Federal With 18 Months To Go. Hold 'Em Or Fold 'Em?

chipcollector | Mar 21, 2023 | 111 posts since 2010

Asking this on behalf of my neighbor who is retired and lives off government pension, social security and interest from CDs.

He has four (4) CD's at Navy Federal CU. All were purchased in 2019 as 5 year CD's

and mature between May and September 2024. Two are jumbos. Interest rates on the CD's are between 3.2 and 3.4%

Initially, I thought the best idea was to take the EWP and re-invest into 5% CD's

but then I found that the EWP was one years interest!

My next thought was to take a loan against one or more of the CD's thinking the interest rate was 1% over the CD rate but then I found that the interest was 2% over the CD rate.

Given all that I am thinking his best course of action is to just live with the CD's until maturity next year.

I'd looking to the community for any advice as I would like to help him. His expenses have risen dramatically over past year for rent and medicine so any incremental income would be helpful.

TIA !

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JeffinEasternFL | Mar 21, 2023 | 744 posts since 2020

Run the calculator on this site for the "hard numbers", without the tax advantage and see! Best bet is that he starts to ladder those so a to have maturities spread out. Perhaps one maturing per year/18 months for about 2 to 5 years ish? He can get 5%+ in all cases out to even 60 mos with today's rates!

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OAG7 | Mar 21, 2023 | 2 posts since 2022

Has he been accruing the interest for those CD's? If Yes he can withdraw accrued interest as necessary. Does he intend to extend the term of those CD's? Has he requested a waiver of the penalties for those specific CD's due to his financial need? I suggest he (or you with him present) call NFCU and discuss the situation with a CSR or manager.

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chipcollector | Mar 21, 2023 | 111 posts since 2010

Thanks Jeff and OAG, he asked about a hardship waiver. Apparently he does not qualify. There is no accrued interest as he takes the interest each month to live on

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Marfa | Mar 21, 2023 | 68 posts since 2022

I was able to change from long term to shorter term without penalty at Navy. If you look at the 18 month and 12 month easy start the rates are better than what he currently has and may be worth a look.

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Sylvia | Mar 21, 2023 | 389 posts since 2012

I recently closed a 5 year CD, converting amount to the 15 month special that's no longer available, with EWP waived. I suggest trying to convert at least one of the CDs to a 12 month for which he can earn 4.40% to 4.45%, while requesting waiver of EWP. In addition to the extra interest, he’d be able to improve his EWP situation. EWP on 12 month CD is lesser of “(1) all dividends for 90 days on the amount withdrawn, or (2) all dividends on the amount withdrawn since the date of issuance or renewal.” Should he want to close the 12 month in, say, 2 months, his EWP would only be interest earned in those 2 months, far better than the year he’s now facing. 18 month is currently the best deal (4.50% to 4.55%) but EWP is up to 180 days. Terms beyond 18 month are not worth considering right now as interest rates are lower.

https://www.navyfederal.org/content/dam/nfculibs/pdfs/certificates-ira-trust/nfcu_602e.pdf

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MY2CENTSWORTH | Mar 21, 2023 | 440 posts since 2016

chipcollector, Navy FCU has been waving the EWP on existing certificates for some time now and the replies from others are all good. I reorganized all of my current regular certificates as well as both Traditional and Roth IRA's with future maturity dates. The 5% special (maybe something new coming from them at the beginning of April??) they were offering last month has ended but it is definitely calling or sending them a private message and they are good at describing what options would be available. Their rates aren't stellar but your neighbor can certainly increase the interest rate that they are receiving presently. Hope that helps.

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chipcollector | Mar 21, 2023 | 111 posts since 2010

Hello:

My neighbor and I want to THANK ALL OF YOU for your comments and suggestions. Based on the suggestions here I went over to my neighbors home this morning and we called Navy Federal.
They were wonderful ! Very sympathetic. My neighbor was able to transfer WITHOUT A PENALTY
all of the older lower coupon CDS into higher coupon CDs with a term/maturity not much longer than he already had. He was so happy ! His wife was crying. Anyway, my neighbors and I want to thank all who responded. The extra several thousand dollars he will earn will go toward his increased rent and medicine expenses. What a great outcome and a wonderful forum !!!!!!!!!!

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Sylvia | Mar 21, 2023 | 389 posts since 2012

Thanks for sharing news of happy outcome. Your neighbor is lucky to have you as advocate.

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SouthernGirl | Mar 21, 2023 | 210 posts since 2022

chipcollecter,
If the goal is to lock in 5% for five years now, you can close each one of those CDs with a 7 day minimum EWP and reinvest at All in Credit Union with an EWP of 90 days.

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SouthernGirl | Mar 21, 2023 | 210 posts since 2022

chipcollecter,
Navy Federal will negotiate these rates. Please never pay more than a 7 day minimum EWP!!! Please read my post Ask the community on Navy FCU will negotiate CDs maturing in 2023 and 2024. If Navy FCU is back to the original rules of negotiating, the CDs maturing in May 2024 can be moved to a 12 month CD in May 2023. The CDs maturing in September 2024 can be moved to an 18 month CD now. If the goal is to lock in 5% CDs now, you can start with a jumbo maturing in September 2024 and convert it to an 18 month CD. At that point, it will be a new CD and then later that week, you can close the CD with a 7 day minimum EWP. As you know, all of the CDs can be converted to an 18 month probably depending on the exact date of maturity in September 2024. You can work to convert all CDs to an 18 month and close each with a 7 day minimum EWP.

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NFO | Mar 21, 2023 | 66 posts since 2022

Did you call them and ask about an EWP waiver for a rollover into a higher rate? People here have been talking about that since December, and I've done it for several accounts.

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chipcollector | Mar 21, 2023 | 111 posts since 2010

Hi NFO

They did not charge any EWP to move the funds to the higher coupon CD.
Actually the term was not much longer than the original. So it was "Win-win"
THANKS!

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