Comments on: How to Create the Ultimate Certificate of Deposit (CD) Ladder http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/ A premier personal finance blog, established 2003. Within, Flexo discusses his own experiences with money, and he and other authors comment on a wide range of personal finance topics. Thu, 31 May 2012 23:50:27 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: MikeW http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-267073 MikeW Sun, 11 Sep 2011 01:13:57 +0000 http://www.consumerismcommentary.com/?p=7168#comment-267073 I'd take the penalty, too, like BobbyC said. Just have to be extra careful on finding the right bank and fully knowing and understanding their requirements and penalty for early withdrawal. If you really need the money right away / emergency, you won't be so worried about what the penalty is. However, if it's a significant rise in rates, you'd have to compare the amount you'd lose via the penalty versus how much you might gain with the new rates, or at least how long it would take a new cd with higher rates to make up the difference. Too small of a rise in rates might not be enough to offset the penalty at all. I’d take the penalty, too, like BobbyC said.
Just have to be extra careful on finding the right bank and fully knowing and understanding their requirements and penalty for early withdrawal.
If you really need the money right away / emergency, you won’t be so worried about what the penalty is.
However, if it’s a significant rise in rates, you’d have to compare the amount you’d lose via the penalty versus how much you might gain with the new rates, or at least how long it would take a new cd with higher rates to make up the difference. Too small of a rise in rates might not be enough to offset the penalty at all.

]]> By: Bob C http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-266264 Bob C Wed, 31 Aug 2011 01:55:14 +0000 http://www.consumerismcommentary.com/?p=7168#comment-266264 I have thought like bobby c for some time now but I'm glad to see there is another who thinks the same way. bob c I have thought like bobby c for some time now but I’m glad to see there is another who thinks the same way. bob c

]]> By: BobbyC http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-254543 BobbyC Wed, 30 Mar 2011 17:17:40 +0000 http://www.consumerismcommentary.com/?p=7168#comment-254543 Currently Ally only applies a penalty of 60 days of interest on early withdrawal. Why wouldn't you always want to get the 5 year CD at 2.4% even if you plan on taking the money out in 1 year. In this case, if you are 3 years into a 5 year CD and a compellingly higher rate is available you can withdraw the funds and open a new 5 year CD with only a 2 month penalty. If you invest $100,000 at 2.4% you'll be earning around $200 a month. After 3 years you'll have earned almost $7500 and it will cost you around $ 236 penalty to take all of the money out and fund a new CD or just because you need the cash. Most of the 5 year CDs I have researched have a 180 day penalty and worthy of more consideration. With $100,000 in a 5 year CD at 2.4% after 1 year you'll have earned around $2426 and it will cost you around $ 217 penalty so you’ll have an after penalty gain of $2209. If instead you invested in a 1 year CD at 1.24% you’ll have a gain of around $1247 at maturity. So I’ll take the penalty any time. Is my logic wrong? Somebody straighten me out if I am. Currently Ally only applies a penalty of 60 days of interest on early withdrawal. Why wouldn’t you always want to get the 5 year CD at 2.4% even if you plan on taking the money out in 1 year. In this case, if you are 3 years into a 5 year CD and a compellingly higher rate is available you can withdraw the funds and open a new 5 year CD with only a 2 month penalty. If you invest $100,000 at 2.4% you’ll be earning around $200 a month. After 3 years you’ll have earned almost $7500 and it will cost you around $ 236 penalty to take all of the money out and fund a new CD or just because you need the cash. Most of the 5 year CDs I have researched have a 180 day penalty and worthy of more consideration.
With $100,000 in a 5 year CD at 2.4% after 1 year you’ll have earned around $2426 and it will cost you around $ 217 penalty so you’ll have an after penalty gain of $2209. If instead you invested in a 1 year CD at 1.24% you’ll have a gain of around $1247 at maturity. So I’ll take the penalty any time. Is my logic wrong? Somebody straighten me out if I am.

]]> By: Ceecee http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-251814 Ceecee Mon, 21 Feb 2011 14:48:12 +0000 http://www.consumerismcommentary.com/?p=7168#comment-251814 As a really conservative investor, I'd like to create one of these. Thanks for the excellent information. As a really conservative investor, I’d like to create one of these. Thanks for the excellent information.

]]> By: Bobka http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-249193 Bobka Wed, 12 Jan 2011 18:26:43 +0000 http://www.consumerismcommentary.com/?p=7168#comment-249193 Thanks for the excellent advice. Ally Bank seems to be a good place to start looking for a long term CD with good rates and limited early withdrawal penalty, if required. Thanks for the excellent advice. Ally Bank seems to be a good place to start looking for a long term CD with good rates and limited early withdrawal penalty, if required.

]]> By: Matt http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-199855 Matt Mon, 09 Nov 2009 03:40:49 +0000 http://www.consumerismcommentary.com/?p=7168#comment-199855 I'd agree with KC, I've been buying 1 yr CDs. Rates can't get lower from here, and there are better opps in the TIP etf and/or I Bonds right now. I've done this with half my emergency fund, with the other half available to cover the interim. I'd agree with KC, I've been buying 1 yr CDs. Rates can't get lower from here, and there are better opps in the TIP etf and/or I Bonds right now. I've done this with half my emergency fund, with the other half available to cover the interim.

]]> By: Matt http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-199854 Matt Mon, 09 Nov 2009 03:40:08 +0000 http://www.consumerismcommentary.com/?p=7168#comment-199854 I'd agree with KC, I've been buying 1 yr CDs. Rates can't get lower from here, and there are better opps in the TIP etf and/or I Bonds right now. I've done this with half my emergency fund, with the other half available to cover the interim. I'd agree with KC, I've been buying 1 yr CDs. Rates can't get lower from here, and there are better opps in the TIP etf and/or I Bonds right now. I've done this with half my emergency fund, with the other half available to cover the interim.

]]> By: Matt http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-208658 Matt Mon, 09 Nov 2009 03:40:00 +0000 http://www.consumerismcommentary.com/?p=7168#comment-208658 I'd agree with KC, I've been buying 1 yr CDs. Rates can't get lower from here, and there are better opps in the TIP etf and/or I Bonds right now. I've done this with half my emergency fund, with the other half available to cover the interim. I’d agree with KC, I’ve been buying 1 yr CDs. Rates can’t get lower from here, and there are better opps in the TIP etf and/or I Bonds right now. I’ve done this with half my emergency fund, with the other half available to cover the interim.

]]> By: Matt http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-208659 Matt Mon, 09 Nov 2009 03:40:00 +0000 http://www.consumerismcommentary.com/?p=7168#comment-208659 I'd agree with KC, I've been buying 1 yr CDs. Rates can't get lower from here, and there are better opps in the TIP etf and/or I Bonds right now. I've done this with half my emergency fund, with the other half available to cover the interim. I’d agree with KC, I’ve been buying 1 yr CDs. Rates can’t get lower from here, and there are better opps in the TIP etf and/or I Bonds right now. I’ve done this with half my emergency fund, with the other half available to cover the interim.

]]> By: KC http://www.consumerismcommentary.com/how-to-create-the-ultimate-certificate-of-deposit-cd-ladder/comment-page-1/#comment-196352 KC Fri, 31 Jul 2009 15:41:29 +0000 http://www.consumerismcommentary.com/?p=7168#comment-196352 My only concern right now locking into a 5 yr CD rate is that at some point rates have to go higher. You could be stuck at year 3 in a 5 yr CD with a rate that is equivalent to what a 1 yr CD is paying out currently. I guess the simplest solution to this would be to stop at 1 year CDs until the field improves a little. It would also solve the problem of tying up too much money too soon. But I am a big fan of CDs. I think of them as my conservative investing. I have a large emergency fund, but it currently only gets 2% in the bank. I also have investments (retirement and long term savings). But I need something in-between and CDs are a good place. My only concern right now locking into a 5 yr CD rate is that at some point rates have to go higher. You could be stuck at year 3 in a 5 yr CD with a rate that is equivalent to what a 1 yr CD is paying out currently. I guess the simplest solution to this would be to stop at 1 year CDs until the field improves a little. It would also solve the problem of tying up too much money too soon.

But I am a big fan of CDs. I think of them as my conservative investing. I have a large emergency fund, but it currently only gets 2% in the bank. I also have investments (retirement and long term savings). But I need something in-between and CDs are a good place.

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