Ideal CD For Today

Kaight | Nov 15, 2023 | 1,192 posts since 2011

This is only just my opinion. And I'm well aware opinions on this matter vary all over the place, so please feel free to disagree:

To me today's ideal CD will mature shortly after next year's presidential election in November. I would even agree with anyone who prefers maturity subsequent to January 20, 2025, since the election could be close and an interval of turbulence might ensue. The idea is to be free of election considerations when your CD matures and you have to reinvest the funds. How long will it take, following the election, before things settle down? It's anyone's guess, but I don't want to have to reinvest maturing CD money with an impending presidential election on everyone's mind. And everyone in this instance includes in particular Jerome Powell and President Biden.

How about the interest rate on your ideal CD? As always I could be full of prunes. But I'm very uncomfortable with any APY south of 6%. These 5+% APYs and (God forbid) 4++% APYs strike me as merely avenues slowly, after taxes and inflation, to lose your purchasing power. It's always difficult with CDs just to come out even in terms of purchasing power maintenance. Heck, you already KNOW inflation is not going below 2%. And core inflation right now, despite all the goody-goody talk, is at 4%. So how you gonna stay even after taxes with a 5.5% APY CD? And I concede even my 6% APY target might well not do the trick . . . . but 6% APY still is the smallest return I would tolerate.

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Maestro | Nov 15, 2023 | 42 posts since 2023

From memory, going back to just prior to the 2020 elections, there was a whole "... the Fed does not want to enact changes in an effort to not sway voter sentiment so close to an election...". Have you considered something like that in you opinion? No changes close to elections would leave me to believe that rate changes would be at the July meeting or before and then coast until after the November elections.

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CDmanFL | Nov 16, 2023 | 286 posts since 2019

I see no rate changes — higher or lower — until after the election. How can the Fed even consider lowering rates with inflation over 2% and I’d be shocked if inflation dropped to 2% or less by next November. All my major bills are still going up. Inflation in the real world (or at least my world) is much higher than the stated 4%. What planet are people on to even bring rate cuts into the conversation? Seriously people, we should be years away from rate cuts. The older the get, the dumber the world becomes.

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Kaight | Nov 16, 2023 | 1,192 posts since 2011

What planet are people on to even bring rate cuts into the conversation?

That's an easy one:

They are living on planet stock market.

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JeffinEasternFL | Nov 16, 2023 | 744 posts since 2020

then you are missing put on some great interest income, I laddered late last year thru this spring, 4 jumbos all maturing every calendar year 2-5 years out and all at 5% APR or greater, and lovin those statements every month! YA can't live in the past, only the present!

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MY2CENTSWORTH | Nov 16, 2023 | 440 posts since 2016

I think we may very well see some additional rate hikes if Powell and the Fed were to continue their work to get inflation back closer to 2% as they initially stated. I would also think that would happen if not before the end of 2023 then in the first half of 2024. I believe that there are some FI's remaining that still haven't been offering competitive certificate rates throughout this rate cycle and that they will have to come from the shadows as time passes unless things turn drastically downward. Of course, like many things in our life journey it's a roll of the dice. I've had nothing substantial to invest for a couple of months after parking my liquid funds in a dozen certificates earlier this year ranging from 18 months to 5 years earning from 5%-6%. I will have three certificates totaling ~300K in the last few weeks of this year that I will likely only ladder a portion of immediately, depending on what terms/rates are being offered at that time as well as gift a portion of it now that my annual interest earnings are much higher than they have been in a decade.

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Ally6770 | Nov 16, 2023 | 4,310 posts since 2010

I have my last traditional IRA maturing in Jan and 2 more Roths I will looking for long term high rates near the end of Jan. I just moved a Roth on the 3rd of this month. All but one of the regular CD's are invested for 4-6 more years except for one more jumbo in 2025 but may not get another CD with that so I can convert more of the last traditional IRA to a Roth each year. I am content where they are now. I have kept enough in savings to gift for the next 5 years and a new car if I need one. These higher CD's rates again came at a perfect time for my planning. Every 5 to 7 years the higher rates have come since the 70's when our family needed them. When the rates were not high a local savings and loan had callable and non callable CD's at a much higher rate than the banks and credit unions that we were able to use. Then later we were able to finally get dial-up internet and finally get Ken's site. It was so slow it took 3 hours to download a grocery ad and over 8 hours to try and download one of my sons songs he wrote and only then if we were not disconnected.

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choice1 | Nov 16, 2023 | 372 posts since 2023

Ally, not to detract but take a look at IRA charitable gift annuity…up to $50K (apparently only for one year) SPIA with payout around/up to 10% per year with the latter taxable (similar to an installment) with no income tax upon initial IRA distribution/purchase of annuity

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w00d00w | Nov 16, 2023 | 360 posts since 2012

i agree that ideally would want a positive return after accounting for inflation and taxation. that number is variable from person to person based on personal income tax rate and personal rate of inflation. the lower those individual rates are, the easier it will be to find a CD in the marketplace that provides a positive real and after-tax return.

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111 | Nov 16, 2023 | 672 posts since 2019

With apologies to Jiminy Cricket, and since it's not that long until Christmas -

When you wish upon a star
That CD rates will not drop far
Anything your heart desires
Will come to you

If your heart is in your dream
No request is too extreme
When you wish upon a star
As dreamers do

The answer, of course, is to diversify your investments. Then you'll be less likely to hear only Crickets when you check your statements.

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racecar | Nov 16, 2023 | 628 posts since 2014

Beautiful! Give 111 a grammy!

My Ideal CD?
One where the bank doesn't notice they entered one too many "0"s while typing in your opening balance. That would be ideal. Yes, that would be ideal.

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111 | Nov 17, 2023 | 672 posts since 2019

Hey thanks racecar! If it's all the same to you, I'll defer that Grammy for now 'cause of course I want to first publicly thank my parents, my co-workers, my nanny when I was 3, my childhood sled Rosebud - etc., etc.

Nah. Here's the point - anyone's "Ideal Investment X" is going to inherently reflect whatever their mind's eye thinks it might be. Or was. Or will be at some point. Assuming their own predilections regarding investment biases.

So it is patently ridiculous to pretend to design a "perfect investment X", or "Y", or anything else. Or frankly, to ask anyone else to do so FOR you.

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