Moving to bank CDs?

[frugal saver]

Is no one else jumping back into bank CDs? I'm currently getting 4.00 to 4.25% on 18 to 24 month CDs, which is better--and much safer--than the dividends I'm getting on my stocks.

No one can predict the future, including the "pundits" on the tv investment shows, but most think that stock prices could be depressed until 2024. And that the Feds will maybe/maybe not raise interest rates again in December and then pause for awhile. Some even talk about them starting to lower the rates next year.

So I jumped in today with 3 new CDs--Alliant FCU, Ally Bank and Goldman Sachs Marcus Bank--and will wait until the next increase to see about doing some more.

[james.hendrickson]

I'm buying small business bonds and I bonds. Small business bonds are a bit riskier, but have rates between 6.5 and 8.5%.

I bonds are paying 6.89%. I bonds have a risk profile comparable to CDs - they're low risk. So, why put money into CDs if there are better alternatives out there?

[disneysteve]

Is no one else jumping back into bank CDs? I'm currently getting 4.00 to 4.25% on 18 to 24 month CDs

So I jumped in today with 3 new CDs--Alliant FCU, Ally Bank and Goldman Sachs Marcus Bank--and will wait until the next increase to see about doing some more.

CDs are fine, but don't buy them direct from the banks, which is what it sounds like you did. Buy brokered CDs through your brokerage account like Vanguard, Schwab, or Fidelity. The rates are much better.

I bought a 3-year CD yesterday for 4.9%. You can get 18 months for 4.8% or 24 months for 4.9%. And always compare the CD rates to the T bill rates and pick whichever is higher.

Rates have already started dropping over the past week or so though as inflation is cooling off, which is why I locked in that 3-year CD yesterday. I don't know that they will increase any more, or at least not by very much.

[disneysteve]

I'm buying small business bonds and I bonds. Small business bonds are a bit riskier, but have rates between 6.5 and 8.5%.

That's not a comparable investment to CDs.

I bonds are paying 6.89%. I bonds have a risk profile comparable to CDs - they're low risk. So, why put money into CDs if there are better alternatives out there?

I bonds are great, but also cumbersome to buy, have a minimum 1-year holding period, and have an annual limit of 10K/person. I bought a 25K CD yesterday alone so well above the I bond limit.

[kork13]

I'd love to dump some cash into longer-term good rate CDs/Treasuries .... But we're just not in that position right now.

We're going to be moving again next summer, and don't know yet what our house situation will be (buy/build/rent). So I'm forced to keep more money than I'd like in liquid/semi-liquid accounts.

[Thrif-t]

I had some cash in my 401k from selling some winners last year and I bought Brokered CD's with some of the money. For some dumb reason my company won't let us buy Treasuries but they will the CD's. But I haven't locked in any longterm CD's. Maybe I'll look when my next CD matures beginning of Dec.

[disneysteve]

Even though rates may have peaked, they're still far better than what they were even a few months ago. We have T bills maturing monthly and the December one is at 2.171% so we should be able to at least double that rate when it comes due. We also have some maturing in 2023 that are under 2%. The rates were great when I bought them but then rates just kept climbing.

[rennigade]

No, we're not buying CDs. 4% doesnt even keep up with inflation.

And for those that are going to throw the classic, "well its better than the market right now." Yes, it is better than the market at the moment, but it still doesnt keep up with inflation. Gotta be forward thinking. Im looking years down the road. For those who are close to retirement, good luck. Better keep working. Things are only going to get worse in the next couple years.

[Petunia 100]

No, we're not buying CDs. 4% doesnt even keep up with inflation.

And for those that are going to throw the classic, "well its better than the market right now." Yes, it is better than the market at the moment, but it still doesnt keep up with inflation. Gotta be forward thinking. Im looking years down the road. For those who are close to retirement, good luck. Better keep working. Things are only going to get worse in the next couple years.

I think so too, so I am going to do just that.

[disneysteve]

No, we're not buying CDs. 4% doesnt even keep up with inflation.

I think the majority of people have a fixed income allocation as part of their portfolio whether they're 80/20, 70/30, or 60/40 like us. Very few people run 100% equity. That said, it's important to seek out the best return for that fixed income money. A disturbing number of people keep an insane amount of money in bank accounts paying 0.01% interest when they could be making 300 times that much with an account with Ally or Capital One. Or 4-5% with CDs and T bills.

If you keep nothing in cash, that's fine if it works for you, but I'd say you're a rarity.

[scfr]

We have some CDs, Treasuries, and bonds. We always have. Always will. We watch rates and DH & I discuss what we think is going to happen in the future and what we think the best terms are. We still have some in a HYSA earning only 3.6% but we're waiting for 5% plus to lock in longer terms . . . and it's getting really close!

[disneysteve]

we're waiting for 5% plus to lock in longer terms . . . and it's getting really close!

You may have missed the peak. That's why I grabbed the 4.9% 3-yr CD the other day. Rates on CDs and T bills have dropped in the past week or so as signs point to inflation decreasing. The supply of longer term brokered CDs has dried up this week so it seems that the banks aren't willing to commit to near-5% rates for more than 2-3 years at this point. There's a 5.3% 10-yr right now but it's callable in 2/23 so that's not saying much. The highest 5-yr is only 4.2% (not callable) which is less than the 3-yr at 4.9% (the one I bought which is still available). I may actually dump more into that one.

[disneysteve]

You may have missed the peak. That's why I grabbed the 4.9% 3-yr CD the other day.

And today I put another 25K into a non-callable 3-yr CD at 4.95%. I think now is a good time to be locking in those longer terms. If rates climb more, we have stuff maturing monthly so we'll still have funds to reinvest at the higher rates. If not, I'm happy with nearly 5% for the next 3 years.

[Jluke]

And today I put another 25K into a non-callable 3-yr CD at 4.95%. I think now is a good time to be locking in those longer terms. If rates climb more, we have stuff maturing monthly so we'll still have funds to reinvest at the higher rates. If not, I'm happy with nearly 5% for the next 3 years.

Do you have the interest paid out to a separate account or do you have it added to the CD balance?

[disneysteve]

Do you have the interest paid out to a separate account or do you have it added to the CD balance?

Brokered CDs don’t compound like regular CDs. The interest will be paid into the settlement fund.