Comments on: Where Should I Roll My CD Money Over To? – Money Mailbox http://moneyning.com/money-mailbox/where-should-i-roll-my-cd-money-over-to-money-mailbox/ A personal finance blog where we share insights on carefully saving money, investing, frugal living, coupons, promo codes because the little things matter in achieving financial freedom! Thu, 24 May 2012 18:06:19 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: CD Rates Blog http://moneyning.com/money-mailbox/where-should-i-roll-my-cd-money-over-to-money-mailbox/comment-page-1/#comment-24607 CD Rates Blog Fri, 05 Mar 2010 22:30:54 +0000 http://moneyning.com/?p=4729#comment-24607 The theory behind laddering is this: Rates go up and down and there is no way to time when, what direction, and for how long. Overall, long-term CDs pay higher than shorter-term. Our data shows a difference of between 0.50% to 0.70% between 1-year CDs and 5-year CDs. So if you build a 5-year ladder with 1-year increments, when the CDs mature you can always purchase 5-year CDs, knowing that first, your purchase at the time will be the highest rate. Second, once a year you will have an opportunity for higher rates. Of course, rates could be lower and in that case some of your existing CDs will be paying the higher rates. CD Laddering is really a method to smooth out the ups and downs of rate cycles, but certainly not have your entire portfolio re-price lower when rates do decrease. cd :O) The theory behind laddering is this: Rates go up and down and there is no way to time when, what direction, and for how long. Overall, long-term CDs pay higher than shorter-term. Our data shows a difference of between 0.50% to 0.70% between 1-year CDs and 5-year CDs.

So if you build a 5-year ladder with 1-year increments, when the CDs mature you can always purchase 5-year CDs, knowing that first, your purchase at the time will be the highest rate. Second, once a year you will have an opportunity for higher rates. Of course, rates could be lower and in that case some of your existing CDs will be paying the higher rates.

CD Laddering is really a method to smooth out the ups and downs of rate cycles, but certainly not have your entire portfolio re-price lower when rates do decrease.

cd :O)

]]> By: Chris http://moneyning.com/money-mailbox/where-should-i-roll-my-cd-money-over-to-money-mailbox/comment-page-1/#comment-24606 Chris Fri, 05 Mar 2010 21:47:32 +0000 http://moneyning.com/?p=4729#comment-24606 My vote for short term investments goes to an online savings account for sure. I agree that bonds will have some tough times ahead, if not the fact that there are record inflows into that investment class. My vote for short term investments goes to an online savings account for sure. I agree that bonds will have some tough times ahead, if not the fact that there are record inflows into that investment class.

]]> By: MoneyNing http://moneyning.com/money-mailbox/where-should-i-roll-my-cd-money-over-to-money-mailbox/comment-page-1/#comment-24604 MoneyNing Fri, 05 Mar 2010 21:12:56 +0000 http://moneyning.com/?p=4729#comment-24604 I will definitely look into a HELOC when I actually have a house. This way, I can be a little more aggressive with my emergency fund, as I can always tap into the equity of my house if in the unfortunate case that I need it. I will definitely look into a HELOC when I actually have a house. This way, I can be a little more aggressive with my emergency fund, as I can always tap into the equity of my house if in the unfortunate case that I need it.

]]> By: MoneyNing http://moneyning.com/money-mailbox/where-should-i-roll-my-cd-money-over-to-money-mailbox/comment-page-1/#comment-24603 MoneyNing Fri, 05 Mar 2010 21:09:12 +0000 http://moneyning.com/?p=4729#comment-24603 While I was writing this post, I thought about the concept of CD ladders, and couldn't bring myself to write it down as a recommendation. It seemed like a good way to get money coming in, but why is the thought of having money coming every 3 months a good thing? I mean, if I'm retired and need income, then a periodic cash influx works like an paycheck, so this is good. However, for most people, isn't the need for cash either now or some time in the unpredictable future? How does having money due once a year help? And if it doesn't help, why am I giving up long term growth potential to invest in a CD ladder? Of course, CD ladders seem like a good solution for a small part of your portfolio, but for many, it's MOST of their savings. This conservative approach may work for some instances in time, but it probably doesn't in my honest opinion. What do you think? While I was writing this post, I thought about the concept of CD ladders, and couldn’t bring myself to write it down as a recommendation. It seemed like a good way to get money coming in, but why is the thought of having money coming every 3 months a good thing?

I mean, if I’m retired and need income, then a periodic cash influx works like an paycheck, so this is good. However, for most people, isn’t the need for cash either now or some time in the unpredictable future? How does having money due once a year help? And if it doesn’t help, why am I giving up long term growth potential to invest in a CD ladder?

Of course, CD ladders seem like a good solution for a small part of your portfolio, but for many, it’s MOST of their savings. This conservative approach may work for some instances in time, but it probably doesn’t in my honest opinion.

What do you think?

]]> By: CD Rates Blog http://moneyning.com/money-mailbox/where-should-i-roll-my-cd-money-over-to-money-mailbox/comment-page-1/#comment-24602 CD Rates Blog Fri, 05 Mar 2010 17:56:33 +0000 http://moneyning.com/?p=4729#comment-24602 I'm a CD guy. Although I wouldn't put long-term savings in a longer-term CD at this point unless: 1) The CD has a low early withdrawal penalty. 2) You have a good ladder already Rates will go up at some point and you don't want to lock in low rates when we are about at the bottom. 3) The CD has a bump-option. I've seen some 2Y and 3Y CDs with decent rates that have bump-options. That way when rates move up you can move the rate up on the CD. cd :O) I’m a CD guy. Although I wouldn’t put long-term savings in a longer-term CD at this point unless:
1) The CD has a low early withdrawal penalty.
2) You have a good ladder already
Rates will go up at some point and you don’t want to lock in low rates when we are about at the bottom.
3) The CD has a bump-option. I’ve seen some 2Y and 3Y CDs with decent rates that have bump-options. That way when rates move up you can move the rate up on the CD.

cd :O)

]]> By: Mason http://moneyning.com/money-mailbox/where-should-i-roll-my-cd-money-over-to-money-mailbox/comment-page-1/#comment-24599 Mason Fri, 05 Mar 2010 16:31:09 +0000 http://moneyning.com/?p=4729#comment-24599 I love the SDY. You can't really beat higher dividends, lower volatility and better growth than the S&P 500. I love the SDY. You can’t really beat higher dividends, lower volatility and better growth than the S&P 500.

]]> By: marci http://moneyning.com/money-mailbox/where-should-i-roll-my-cd-money-over-to-money-mailbox/comment-page-1/#comment-24597 marci Fri, 05 Mar 2010 15:36:29 +0000 http://moneyning.com/?p=4729#comment-24597 CD's CAN still be very liquid IF you borrow against them. I can borrow from the bank at 2% more than the interest the CD is giving me, use that cash for whatever, and then pay back the CD loan when the CD matures. That way I incur NO penalties for early withdrawal of the CD. Yes, the interest is higher, but it is shortterm and saves the penalty. You'd need to be absolutely sure that it was essential that you have the money, but it can be done. So don't discount CD's being somewhat Liquid :) And for an instant transfer of cash, a couple clicks or a phone call and 80% of the equity in my home is available thru my already set up (in case of emergency) home equity line of credit. It doesn't get any quicker than that - and that is now my primary emergency fund so I can keep everything else in longer term bigger interest investments. Then when the investment matures, I'll pay off the HELOC loan. It's at 4.99% if I were to use it. CD’s CAN still be very liquid IF you borrow against them. I can borrow from the bank at 2% more than the interest the CD is giving me, use that cash for whatever, and then pay back the CD loan when the CD matures. That way I incur NO penalties for early withdrawal of the CD. Yes, the interest is higher, but it is shortterm and saves the penalty. You’d need to be absolutely sure that it was essential that you have the money, but it can be done.

So don’t discount CD’s being somewhat Liquid :)

And for an instant transfer of cash, a couple clicks or a phone call and 80% of the equity in my home is available thru my already set up (in case of emergency) home equity line of credit. It doesn’t get any quicker than that – and that is now my primary emergency fund so I can keep everything else in longer term bigger interest investments. Then when the investment matures, I’ll pay off the HELOC loan. It’s at 4.99% if I were to use it.

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