View Full Version : laddering CD/s
Howdy all,
So with my extra time off this week and next I was looking at my retirement money that I have in my bank and another small account with Target (hey 5 years of part time work gave me something). So they are abysmal. Really. I have been thinking for some time about switching to laddering CD's with the money. Here is the advice I think I need from the conservative financial folks.
* how important is the reliability of the bank? My bank is raking high but has insanely low interest on CD's, as does my credit union. Some higher yields are 5 star banks and some slightly higher rates are 1 star banks.
* would you ladder money that is going from a 401K into an IRA? And wait, can I do that? I think I can but just realized that I may be limited.
Okay that is all,
iris lily
12-24-11, 6:40pm
I don't have answers to your questions. But I'm going to suggest something to just think about: do you really wish to give yourself more tasks concerning finances and schedules of paperwork and the like? Just something to think about, based on your posts over the years of your struggles with financial paperwork piling up and getting out of hand.
Zoe Girl
12-25-11, 10:26am
OOh, ok I am waiting for teens to wake up on Christmas morning. I haven't posted a total update but I quit my second job at Target, and it seems like a miracle but I still have my head above water financially. I have times where I earn extra income from camps we run over breaks. In any case I have had sooo much free time and I am making a huge dent in my overall finances. THere are a few bills that will be paid as soon as I can but most everything at least has the envelope opened, I am aware of it, and there is a plan to make sure everything is paid. I can't say enough about how impossible it is to take care of these things when you work 7 days a week, and I did that for 5 years. I am doing some fun stuff and spending time with my family, however I am really able to get through these tasks.
You have a good memory, sorry I didn't update about how much better it is going. Money is tight but it is stretching farther than ever when I have the time to take care of things.
iris lily
12-25-11, 11:57am
That's great that you are getting on top of things, that's why, if I were you, I would not make more commitments to financial management tasks for one year, twelve months, from today. Let it all sit in whatever financial instruments they are in. Chill. See where you are in one year.
Laddering requires management and monitoring, and while that may seem minimal to the financial whizzes here, it is still time that you (the general you) must spend.
CD's are normally insured by the FDIC. I would rather deal with a good bank regardless, but the FDIC insurance adds a level of comfort. You should ask if the CD you would be buying is FDIC insured. Here is a good article about CD's, insurance, and various pitfalls.
http://www.fdic.gov/deposit/deposits/certificate/index.html
rosarugosa
12-25-11, 4:20pm
Thanks for the link, Rogar. This is a timely topic for me, because my mother has asked for me to assist with her CD ladder. Her bank is only offering her .5% on a CD that just matured, and I'm researching better deals for her. I think I like Ally Bank's step-up CD. It's for 4 yrs at 1.6%, and you can raise the rate twice over the life of the CD, assuming that rates rise. There's also a two year step-up at 1.18%, and you can raise the rate once over the life of the CD. Has anyone used Ally Bank? My Mom has a high level of trust in me, but she is very leery of banks without a local physical presence. When she asked where Ally Bank was, and I told her it was pretty much an online institution, you would have thought I had said it was on Mars and she would have to go there to pick up her money when the CD matures! :) I am listed on the account with her, so I could handle all the transfers, etc. on her behalf. She has trouble managing paperwork and I do not, so if I take care of that type of thing for her, it is another plus, although I am careful to make it clear that she is the boss, and I am just acting as her devoted assistant in the matter.
Thank you Iris Lily,
I thought it would just be a one time thing I could do over this break and follow up in a year at the first maturity, but if it takes maintenance work then I will put it off for a year. Not sure I am up to adding one more deal to manage when I am just doing a good job with what I struggled with.
The other thing I can do is ask my retired dad who is really good with money to help out with this. Maybe in 6 months or so if I am still feeling really on top of things.
I have found it very easy to manage CDs through Schwab, you can do everything simply online, and the customer service people are quite helpful.
sweetana3
12-25-11, 6:53pm
I also have gotten good service with Schwab and both of our local credit unions. We have our CD ladder at the credit unions. We can do most anything online and either in person or on the phone. This makes it really easy to manage.
I use Ally to keep my spare cash and laddered CDs. I try to keep 2 or 3 CDs that come due each January to supplement my pension and investment income. I've been with them for a couple of years and had no problems with transferring my $$ when needed.
Oh that is good to know, I looked at Ally and it had the best rates combined with a high bank rating so they were my #1 choice but I didn't know anyone who used them.
Howdy all,
So with my extra time off this week and next I was looking at my retirement money that I have in my bank and another small account with Target (hey 5 years of part time work gave me something). So they are abysmal. Really. I have been thinking for some time about switching to laddering CD's with the money. Here is the advice I think I need from the conservative financial folks.
* how important is the reliability of the bank? My bank is raking high but has insanely low interest on CD's, as does my credit union. Some higher yields are 5 star banks and some slightly higher rates are 1 star banks.
* would you ladder money that is going from a 401K into an IRA? And wait, can I do that? I think I can but just realized that I may be limited.
Okay that is all,
Yes, you can go from a 401K to an IRA, just make sure that you set up the account with the banks as an IRA. We did that with my DH account at Pentagon Federal Credit Union four years ago. At that time, they were having excellent CD rates of 6%! Not that great right now, but I would suggest checking out:
www.depositaccounts.com/blog/ (http://www.depositaccounts.com/blog/)
The guy running the blog is excellent for finding deals and great CD rates.
That's great that you are getting on top of things, that's why, if I were you, I would not make more commitments to financial management tasks for one year, twelve months, from today. Let it all sit in whatever financial instruments they are in. Chill. See where you are in one year.
Laddering requires management and monitoring, and while that may seem minimal to the financial whizzes here, it is still time that you (the general you) must spend.
Laddering does not always mean more monitoring and management if you set them up well in the beginning.
I would suggest starting small. Try out a three month CD, a six month CD. I would not suggest getting a really long term CD as the rates might change (which is why you do laddering but also for income).
You figure that this is money that you are not going to touch, well, then you could go for a long term CD - We have several CDs that are for 7 years. I kind of wished we did all of them for 7 years, but we had no idea whether or not we would need the money at that time. (these are not IRA CDs, just regular ones)
If you plan on putting more money into your IRA over the years of the CD, then I would suggest getting a IRA money market account with the bank that holds the CD. That way once the CD comes due, you can set it up to go into the MM rather than renew in a CD that might have a horrible rate. We did this with each bank we had a CD in.
CD's are normally insured by the FDIC. I would rather deal with a good bank regardless, but the FDIC insurance adds a level of comfort. You should ask if the CD you would be buying is FDIC insured.
The reliability of the bank is important, even though FDIC will insure the deposits that you have (up to 250K) but - Say the bank goes under, and you have interest in the CD, sometimes you may not get that interest. Most often though, it is not a problem, but I would say it is better to go to solid credit unions that have slightly better CD rates.
Best CD rates roundup (http://www.depositaccounts.com/blog/2011/12/survey-of-the-best-cd-rates-for-december-23-2011.html)
Zoe Girl
12-27-11, 11:33am
Ok I did it for my 401K that I had to roll over or else they would have put it in a specific bank in an IRA. The rates at that bank are horrific so 2 10 minute phone calls and that is good. I may leave the others for awhile but this was super easy so far. Even that 401k went up more than my larger account at the bank where I have my checking account. So eventually that will have to be handled even though it seems that nothng is doing much of earning money.
I know I am pretty tight every month on expenses, and it seems that if I take this money and pay for things now, even my little bit of debt, then I won't get it back. I just know my brain and the big ideas of saving money are harder than just pinching pennies every month and forgetting about the money in savings and retirement.
COngratulations on getting this taken care of, Zoegirl! I don't know about you, but I get a kind of rush once I deal with stuff like this. Hope that positive energy helps carry you through the end of the year with more proactive and constructive changes that help move you toward the future you want.
Off to post a new thread about 2012 goals -- see, you have us inspired :)
lhamo
Really? I inspired someone, well okay. I have done so much and I just want to get more done but am pacing myself. Part of it is that my 'undefined relationship' is being a good boy and visiting his mom in Texas and doing some big projects with her. Lots of time on my hands, even made my annual checkup appointment.
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