Laddering CDs

[tennisWalt Super Moderator Find all posts View Profile Close tennisWalt]

So How Do You Handle This Problem?

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Changing gears . . .

All that said, they are a pain in the butt, especially in IRA's, since our fearful leaders have not provided for an efficient way of managing retirement accounts. If I were in charge, a person could have an IRA umbrella and then be able to freely manage assets under that umbrella . . . any qualified assets at any institution . . . without having to repeatedly set up and close separate retirement accounts at each institution or brokerage.

Like a Trust.

Call it a Qualified Retirement Trust (Traditional, Roth, SEP, etc.). It would be the job of the Trustee to manage the Trust according to the rules of retirement accounts. That would free the financial institutions from the cumbersome chore that involves. The could just offer their product (CD or whatever) without all the paperwork and reporting.

The way it works now, when a CD matures and you want to move it to another institution, it takes a month and a mountain of paperwork to do that. With a Retirement Trust, you would just do it, give the order to the first institution to send the money to the second one.

BTW, the financial institutions are called Trustees when it is qualified retirement accounts, so just change it to one Trustee managing their entire account.

Wow, that is a good idea.

I gave you a possible solution to this problem. And how I handle the problem. What is your solution?

Walt

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

I'm hoping you will answer my question about Schwab.

With them, can you have any IRA qualified investment? Or just what they offer, or represent?

As to your question, I deal directly with each Trustee, whether is was AC, or any of the banks and credit unions. That means setting up IRA qualified plans at each institution.

I gave a suggested solution to that, to not require each financial institution to do all the paperwork and reporting required for retirement accounts, but have each person have one Trust/trustee that does it for their retirement accounts.

Then, the banks, credit unions, brokerages and financial institutions could just offer products without having to worry about whether they are, or label them retirement products, and not have to go through all the BS required for retirement products.

Much as Schwab does for you, but for any product, anywhere.

I gave you a possible solution to this problem. And how I handle the problem. What is your solution?

Walt

[tennisWalt Super Moderator Find all posts View Profile Close tennisWalt]

Does This Help With Your Question?

I'm hoping you will answer my question about Schwab.

With them, can you have any IRA qualified investment? Or just what they offer, or represent?

As to your question, I deal directly with each Trustee, whether is was AC, or any of the banks and credit unions. That means setting up IRA qualified plans at each institution.

I gave a suggested solution to that, to not require each financial institution to do all the paperwork and reporting required for retirement accounts, but have each person have one Trust/trustee that does it for their retirement accounts.

Then, the banks, credit unions, brokerages and financial institutions could just offer products without having to worry about whether they are, or label them retirement products, and not have to go through all the BS required for retirement products.

Much as Schwab does for you, but for any product, anywhere.

I think I answered that here in post #9.

There are No-Load, No-Transaction-Fee Funds available at Schwab from many Mutual Fund Companies, like Janus, American Funds, Neuberger Berman, Dreyfus, and OppenheimerFunds.

You do not have to put you money in just Schwab products.

What do you mean by IRA qualified investment?

First of all you need an IRA Account. You could set this up with a rollover deposit or new IRA money. Inside this account you have a Money Market Fund. This is were the money would go first. From there you can transfer to any investment.... Stocks and Options, Mutual Funds, ETFs, Bonds, and CDs. Anything that according to the IRS is qualified for an IRA Account, you can invest in. I do this on-line.

If you want to keep cost down you can invest in No-Load, No-Transaction-
Fee Funds.

The mutual fund companies pay Schwab to handle the cost of bookkeeping. I pay no more than you would to buy a fund directly from the mutual fund company. In fact you may even pay a fee for having your account with the No Load Mutual Fund Company. Then when you move the money between Mutual Fund Companies it may take several days for the transaction to happen and several weeks before the money is transferred.

I can sell shares in a Mutual Fund before 3:00 pm and the transaction will happen before the next day.

With the speed that the market can go down, this is a very important point.

Or you can invests in investments that have fees like Load Mutual Funds and Stocks.

I prefer to keep the cost down by investing in No-Load, No-Transaction-
Fee Funds. However, I have paid a transaction fee to get into Funds like Vanguard that have a lower expense fee. Like VANGUARD TOTAL STOCK MKT INDEX FUND has a lower expense fee than the Schwab Total Stock Mkt Index Fund.

Walt

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

The bulk of our CDs I have locked in at 5%-plus for 5 or 7 year terms. Of course, right now, that looks great!!!

But, you have to have some funds in shorter terms. Those 1-year CDs that we are sorta forced into keeping have gone from 5% two years ago, to 3.44% last year, to 1.5% now (just renewing this month).

Of course, for those 1-year CDs we are not sorta forced into keeping, also maturing this month, I have put them into savings accounts at 2%. More liquid, but still sucky.

When I reviewed my dad's finances back to '89, to try to find out how much his broker had stolen/lost, some of his CDs were 11%.

That would be nice . . . if we were getting that.

[tonyg Goomba & Super Moderator Find all posts View Profile Close tonyg]

The rates are so low around here that I'm putting money into solid stocks that have a good dividend.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Oooo!

I got an email saying we'll get an extra .1 % if we renew, only they it look better by saying .10%.

Wow! 2.1%! Hard to pass on that.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

The national average for 5-year IRA CDs right now is 2.30%. The highest 5-year CD return is 3.59%, and it is at a marginal bank.

We have 17 CDs right now, in amounts varying from $5000 to $115000 and terms from 1 year to 7 years.

Accounting for amounts and terms, our average return is 4.49454%.

Since I posted that, about 1/4 of our CDs have matured, which would be about normal if I had been laddering. I have only renewed at prevailing rates on the ones that I sorta have to.

Because I had stopped laddering, and had renewed most at higher rates for longer terms before interest rates really started falling, the weighted average return for all of them is now at 3.812%.

Those that I had to renew are at 1.5%, so we are still substantially above that.

The ones that I recently did not renew I have in savings accounts at 1.75% and 2.00%, with 100% liquidity. They are earning rates comparable to CD rates, and are free to be put back into CDs when long term rates go back up.

[Tia Senior Member Find all posts View Profile Close Tia]

Hi

So anyone with a educated guess as to when rates will head up again? I have some money <18K that was thinking of putting into a CD or 2, as my money market is paying zilch now.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Hi

So anyone with a educated guess as to when rates will head up again? I have some money <18K that was thinking of putting into a CD or 2, as my money market is paying zilch now.

I am going short term, actually savings accounts, biding time.

No one can see far enough to answer your question.

[Tia Senior Member Find all posts View Profile Close Tia]

I don't suppose the rates on savings can go much lower, but not locking the $ up allows a person to move when the rates do finally go up somewhere.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

I am going short term, actually savings accounts, biding time.

No one can see far enough to answer your question.

Something hard to find, Navy Federal Crtedit Union has IRA MMSAs. They don't pay squat, but neither do CDs right now.

We had some IRA CDs mature and did not want to tie stuff up for ten years just to get 3%.

If you need liquidity in your IRA CDs or want to sit on the sidelines until rates go back up, check it out.

Like always, transferring CDs is still problematic, so make sure you make copies of the transfer forms and keep on top of it. I sent the forms for this transfer (6 accounts) 9/ and just got it straightened out (well, except for one of them not showing at NFCU yet) 10/7.

& keep copies in case the old trustee accidentally records it as a distribution, cuz you'll be having to prove things to the IRS in a couple of years.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Related, but not, what do you think about the idea of allowing qualified foreclosures to be purchased with IRA funds, and held in IRA accounts. . . to help get the glut of foreclosures off the market.

The accounting and reporting could be dealt with.

If you could, we would.

So, as an example, if the choices were a somewhat risky stock fund, a 2% CD, or a winter home in Florida for half what it costs 3 years ago. . .

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Our 5% CDs have another 2 1/2 years, so here's hoping the economy gets back on track by then.

Does anyone get the feeling the big banks are still making big bucks.

[joycapecod Silver Contributor Find all posts View Profile Close joycapecod]

Our 5% CDs have another 2 1/2 years, so here's hoping the economy gets back on track by then.

Does anyone get the feeling the big banks are still making big bucks.

Absolutely, as are the CEO and COO of those banks along with retention bonuses and other perks...


Joy