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Ally Bank: 13-Month Select CD
4.60% APY
(no minimum deposit)
Ally Bank is offering a 13-Month Select Certificate of Deposit at 4.60% APY with no minimum deposit.
Thanks to Community Member SUCHaDEAL for posting this deal.
Thanks to Community Member SUCHaDEAL for posting this deal.
Original Post
Written by
Edited January 20, 2023
at 07:38 PM
Created 01-19-2023
at 02:00 PM
by SUCHaDEAL
in
Finance
(4)
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Edit: ^ The above has an argument against it depending on your view of how Feb-Apr CPI will impact the inflation component of the next i-bond rates. YMMV.
You didn't miss the boat at all btw, I just think this is a good time to buy. There's a lot of laymen inflationary talk and fearmongering going on but sharp traders who actually trade bonds are already looking ahead towards deflation here, and the retail interest-bearing products are going to catch up to that sentiment imo.
Anyway, in order after i-bonds if you don't need the money for 1-2 years:
1. 27-month (a little over 2 years but still) CD posted on SD today that was at 5%
2. 12-month t-bill (~4.65% or so, NOTE: This may be #1 if you live in a high income tax state)
3. CD like the one here for 4.6%
4. No-penalty CD at SallieMae for 4.4%
I actually think the liquidity with the SallieMae CD is worth the 0.2% as I said in my first comment, for the opportunity cost alone. I would rank it ahead of this Ally CD but curated it based on what you said. You never know what could open up and this is a hedge against rates rising higher due to unforeseen wage growth or other inflationary (from a CPE perspective) components that the Fed would use to justify more hikes than anticipated/priced in. Just my 2c, but anyway, buy the ibonds first this quarter.
1. The dot plot released in subsequent Fed meetings where Fed members provide forward guidance on the terminal rate.
2. The Fed's forecast of core inflation through 2024 and beyond (I believe they're looking at 3.1% long-run, but I might be off on that, don't want to check right now)
3. How 2-5y yields react to the above 2 points
4. How breakevens are pricing cuts moving forward. When, for how long, and how much as well as how aggressively.
With all that in mind, and this is really more of a thought exercise from a trading perspective than for consumers holding these products to maturity, I think the current 5y CD rates will have a positive real return as early as Q3 2024. I think less so of the US 5y mostly because it's trading at 3.5%, but even then I'd probably be long the US 5y rather than short.
I'm not intimately familiar with these banks' business models but a few of these rates, at a surface level, give off an "asleep at the wheel" vibe. The short bond trade is super crowded across funds and crowded trades usually don't go well.
If I were specifically in the market for 5y CDs (I'm not) I'd be buying them now, and I think this will be close to, if not the, secular terminal rate for this cycle.
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On the cover of Bloomberg and Barrons for being a great financial advisor as he would tell me over and over
In short, you get credited for it. Like an IRA contribution.
I'm going to deal with the same situation next year. I'm imagining that it will be a tax credit, aka it reduces your taxable income by the full amount of the penalty.
In my case the penalty was $1200 & I'm taxed at 22% for income. If I'm understanding it correctly, that credit would essentially save me $264 in taxes owed, which is what 22% of $1200 would be.
If you simply buy your own treasury bills (rather than letting VUSXX do it for you), then you'll get a better return (e.g. 3 month is yielding ~4.65% and 6 month is yielding ~4.8%). Also, all of the gains will not be subject to state and local tax. Finally, you'll pay no fees or expense ratios (assuming your brokerage is like Fidelity and doesn't charge fees to trade treasuries). Treasuries can decline in value on the secondary market, but if you stick with short terms like 3-6 months and hold them for at least a week or so, then this is very very unlikely.
In short, VUSXX isn't bad, but if you're willing to put in a tiny bit of work and take a tiny tiny bit of risk, then you can get a better return, which may have some tax advantages too.
Vanguard says they do not charge a fee to sell. Am going to try them and see if that is true.
Thanks again
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Vanguard says they do not charge a fee to sell. Am going to try them and see if that is true.
Thanks again
It is very important to name your beneficiaries in your TD account and update that list when changes occur such as name changes in marriage, etc.
And very extremely importantly: Notify those beneficiaries that they are named in your TD account and have a record of your account number and PW somewhere that is accessible to them should you pass away suddenly. I am told that TD nor the govt does not reach out to beneficiaries upon death of the account holder. If those beneficiaries have never had any idea or knowledge that you ever held a TD account with them being named as beneficiary, they would be at risk of losing their rightful inheritance. Put it in your will or do whatever works, but let someone know. Example: Parents of a young family establish a TD account and name the preschool kids as beneficiaries and over the years they accumulate a large sum of IBonds etc. but they neglected to tell the kids or anyone else. Years later they both pass away and the kids never knew that there was a TD account with them listed as beneficiaries. That would be a sad and preventable scenario.
Upon death of an individual account holder, the account is immediately locked and the beneficiaries must contact TD to conduct a transfer of the account to a new account that must be established by the named beneficiary. It's quite the process, but the TD customer service people are knowledgeable and are a great help. Protip: The process is far easier if the TD account is in the name of a revocable trust and the beneficiary is a trustee or successor trustee of that trust.
It is very important to name your beneficiaries in your TD account and update that list when changes occur such as name changes in marriage, etc.
And very extremely importantly: Notify those beneficiaries that they are named in your TD account and have a record of your account number and PW somewhere that is accessible to them should you pass away suddenly. I am told that TD nor the govt does not reach out to beneficiaries upon death of the account holder. If those beneficiaries have never had any idea or knowledge that you ever held a TD account with them being named as beneficiary, they would be at risk of losing their rightful inheritance. Put it in your will or do whatever works, but let someone know. Example: Parents of a young family establish a TD account and name the preschool kids as beneficiaries and over the years they accumulate a large sum of IBonds etc. but they neglected to tell the kids or anyone else. Years later they both pass away and the kids never knew that there was a TD account with them listed as beneficiaries. That would be a sad and preventable scenario.
Upon death of an individual account holder, the account is immediately locked and the beneficiaries must contact TD to conduct a transfer of the account to a new account that must be established by the named beneficiary. It's quite the process, but the TD customer service people are knowledgeable and are a great help. Protip: The process is far easier if the TD account is in the name of a revocable trust and the beneficiary is a trustee or successor trustee of that trust.
Regarding revocable trust, you can double the amount of I-bonds you can buy per year by buying one as an individual and buying another through a revocable living trust. I never quite figured out the proper titling for a revocable trust on TD (I think I got confused with the abbreviations they want you to use), so didn't try that way.
Another twist would be if Dad gifts his kids $X in IBonds and the kids don't know about it and Dad suddenly passes away, what happens to the kids' gifted IBonds and who (if anyone) steps in to distribute them to the kids?
$30,000 limit for individual, spouse and trust. $10,000 for each named individual with named spouse and $10,000 for the trust (just the trust alone, not for each trustee). Not sure about gifting limits per year, etc. since that's not been in my personal situation.
Another twist would be if Dad gifts his kids $X in IBonds and the kids don't know about it and Dad suddenly passes away, what happens to the kids' gifted IBonds and who (if anyone) steps in to distribute them to the kids?
Very true. I think they call it an entity IIRC.
$30,000 limit for individual, spouse and trust. $10,000 for each named individual with named spouse and $10,000 for the trust (just the trust alone, not for each trustee). Not sure about gifting limits per year, etc. since that's not been in my personal situation.
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I received my info and "education" on this when I purchased IBonds for my spouse several years ago and we contacted TD by phone. They very helpfully explained the $10g limits for individuals and they explained that we could add another $10g if we opened an account in the name of our trust. They advised us to establish a new personal account for the spouse (spouse's SSN) with me as secondary, added with spouse on my account that was already established (my SSN), then they explained the process for establishing the separate trust (entity) account for our existing living trust (using my SSN). That gave us a total of 3 accounts.
In addition to the above, I have had experience in dealing with closing and disbursing funds in TD accounts due to death of family members in the past. I found that direct contact with TD was extremely helpful.
Other than that, I'm not an accountant or investment advisor or financial wizard, etc. but just a random internet person trying to help someone so please don't rely on this info alone but confirm through the TD site or direct contact with them prior to taking action.
How to set up an Entity Trust Account in TreasuryDirect [treasurydirect.gov]