Hard to justify a CD with penalty at 4.6% when a no penalty at 4.4% exists (Sallie Mae/Savebetter). Give yourself the flexibility/liquidity option and give up the 0.2%, seems like the right move.
Well, step 1 is maxing out the i-bond contribution ($10k/pp/py) if you haven't done that, before May when the new rate will certainly be lower. So, do that first for your first $10k.
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.
I think you're thinking about this correctly. A 50bp move from the current rate isn't going to make a material difference in 5y CD yields, which seem to be between 4.3% and 4.5% at the time of writing. Instead, consider what WILL drive them:
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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No, one of the grantors of the trust (entity) uses his/her SSN or tax ID # to establish the TD account in the name of his/her trust. Since taxes on IBonds are payable only when cashed in, there are no 1099-INT forms sent unless cashed in. Not sure what happens to T-Bill interest as it accumulates since I only did IBonds.
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.
My bank/investment accounts are titled in the exact name of my trust, but TD seems to want it in a different format where you don't put the exact name of the trust but instead have your under Declaration of Trust dated 1/1/2021?
And what is meant by "with spouse"? Are you adding your spouse as a secondary account holder instead of as a beneficiary?
Can I do 4.6% in an IRA? Don't trust the markets right now.
You can invest in anything in an IRA. But for best results stock market is a buy and hold for the long term. Going in and out of the market causes you to miss out on gains. I'm fully invested 80% stocks and 20% bonds in my accounts.
And Presidential Bank Advantage Checking is 4.25% now up to $25,000.
lots of hoops to jump through every month!
"An electronic monthly deposit of $500 or more from payroll, pension, social security, or annuity is required. Each account must have a unique direct deposit source. At least seven (7) electronic withdrawals per month are required (electronic withdrawals include: ATM, POS, ACH and Bill Payments.) Accounts that do not meet the minimum deposit and withdrawal requirements will earn a lower interest rate."
My bank/investment accounts are titled in the exact name of my trust, but TD seems to want it in a different format where you don't put the exact name of the trust but instead have your under Declaration of Trust dated 1/1/2021?
Yes, IIRC it was somewhat confusing which is why we called the TD customer service line and they walked us through the process. It was then actually pretty simple.
Quote
from poohbie
:
And what is meant by "with spouse"? Are you adding your spouse as a secondary account holder instead of as a beneficiary?
Yes. My words "with spouse" was probably not clear. What I probably should have said was:
They advised us to establish a new personal account for the spouse (using spouse's SSN) WITH [my name] as secondary. They had me add WITH [spouse's name] on my account that was already established (my SSN)
Since those two accounts are individual accounts and not trust accounts, our kids were added to each of the individual accounts as beneficiaries in case both of us should pass away. Otherwise when one of us passes away, the other named as secondary takes over the account.
Can I do 4.6% in an IRA? Don't trust the markets right now.
You can set up an account in a company such as Vanguard as an IRA account (regular or Roth or both seperately). You then transfer as much $$ to the account as often as you want. The cash goes into a "settlement fund" which actually is VMFXX. Then you can choose from their list of ETF's, mutual funds, etc. and buy shares of those ETF's etc. from the $$ that you transferred into your account. You can at any time buy or sell those ETF's etc. and keep the proceeds in the IRA account to be used for future investment within their list of ETF's etc.. Whatever the % yield each ETF etc. earns is the earnings in your IRA.
Vanguard's VMFXX Federal Money Market SEC 7 day yield is 4.29%.
The rules are the same for penalties of withdrawl of $$ from the IRA account as any IRA, but there are no penalties for buying or selling ETF's etc. within the account.
They advised us to establish a new personal account for the spouse (using spouse's SSN) WITH [my name] as secondary. They had me add WITH [spouse's name] on my account that was already established (my SSN)
Since those two accounts are individual accounts and not trust accounts, our kids were added to each of the individual accounts as beneficiaries in case both of us should pass away. Otherwise when one of us passes away, the other named as secondary takes over the account.
I think I got it. There is an option to title an account with a secondary owner, but it seems to force you to choose whether you want the second name to be a secondary owner or beneficiary. And you don't have the option to have both a secondary owner and a beneficiary. So by adding "WITH ", you're effectively getting a secondary owner on the account while still being able to add a beneficiary.
Since you have multiple kids, how do you add both of them on as beneficiaries for a single bond?
Vanguard's VMFXX Federal Money Market SEC 7 day yield is 4.29%.
Go with VMRXX for 0.01% more yield (currently 4.3%). It's the Vanguard Cash Reserves Federal Money Market Fund. Not sure what other difference there is between the 2 funds as they're very similarly titled, but it's been tracking at 0.01% more yield than VMFXX since I started checking a couple months ago.
I think I got it. There is an option to title an account with a secondary owner, but it seems to force you to choose whether you want the second name to be a secondary owner or beneficiary. And you don't have the option to have both a secondary owner and a beneficiary. So by adding "WITH ", you're effectively getting a secondary owner on the account while still being able to add a beneficiary.
Since you have multiple kids, how do you add both of them on as beneficiaries for a single bond?
IIRC there was a capability to add another beneficiary after the first beneficiary was entered. I think there was a button to click on that said add another, or something like that. This was several years ago.
Go with VMRXX for 0.01% more yield (currently 4.3%). It's the Vanguard Cash Reserves Federal Money Market Fund. Not sure what other difference there is between the 2 funds as they're very similarly titled, but it's been tracking at 0.01% more yield than VMFXX since I started checking a couple months ago.
I was using VMFXX since it was the "settlement fund" and the $$ was "liquid" to quickly buy into other funds with.
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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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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]
My bank/investment accounts are titled in the exact name of my trust, but TD seems to want it in a different format where you don't put the exact name of the trust but instead have your under Declaration of Trust dated 1/1/2021?
And what is meant by "with spouse"? Are you adding your spouse as a secondary account holder instead of as a beneficiary?
$499.28
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"An electronic monthly deposit of $500 or more from payroll, pension, social security, or annuity is required. Each account must have a unique direct deposit source. At least seven (7) electronic withdrawals per month are required (electronic withdrawals include: ATM, POS, ACH and Bill Payments.) Accounts that do not meet the minimum deposit and withdrawal requirements will earn a lower interest rate."
not worth it if you're already not doing this
My bank/investment accounts are titled in the exact name of my trust, but TD seems to want it in a different format where you don't put the exact name of the trust but instead have your under Declaration of Trust dated 1/1/2021?
Since those two accounts are individual accounts and not trust accounts, our kids were added to each of the individual accounts as beneficiaries in case both of us should pass away. Otherwise when one of us passes away, the other named as secondary takes over the account.
Vanguard's VMFXX Federal Money Market SEC 7 day yield is 4.29%.
The rules are the same for penalties of withdrawl of $$ from the IRA account as any IRA, but there are no penalties for buying or selling ETF's etc. within the account.
Since you have multiple kids, how do you add both of them on as beneficiaries for a single bond?
Since you have multiple kids, how do you add both of them on as beneficiaries for a single bond?
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I was using VMFXX since it was the "settlement fund" and the $$ was "liquid" to quickly buy into other funds with.