laddered IRA CD's

[Zoe Girl]

Right now I don't see anything better for a small investment than laddering CD's. I have some retirement funds, about $18K, that used to be in another account. It was set up in my divorce so I didn't know that much about it. Well in the recession it took a hit and never recovered. So I finally checked it out and it was earning $4 a year or so! I moved it over to Ally in cd's and had about $2K from Target already. Several mature in January and they let me set up the new terms right now since I know that January is going to be very very busy.

I am just really proud of myself, I tend to avoid money but since I got the raise I can pay my own bills except for emergencies and that is huge. I even got a financial counselor to help me and if I reach my emergency fund goals I am going to replace my personal laptop. Eventually I could get a new couch. But meanwhile paying all my bills without any assistance (ie child support which will end soon) is a really big deal. Does anyone put their emergency fund in laddered CD's? I am thinking about $500-$1,000 amounts that mature every 3 months, in case of a large car repair I can always just take the penalty.

[kib]

Congratulations on tackling your own "elephant", one bite at a time!

I actually do a small cd ladder at Ally for emergency funds. Their 5 year rate is 2%, acceptable. But I have to ask, are you putting it in Cd accounts so you won't spend it? The Ally savings account pays 1% and the money is immediately available with no penalty, the 3 month cd is only paying .3%.

ETA - for me, the "secret" is to put it in multiple accounts, not necessarily short term ones. I wouldn't want to have to break a $20,000 5 year cd to make a car repair, my "ladder" is all 5 years chopped into $2,000 chunks.

[nswef]

I stopped doing short term CDs because the Ally savings account rate was decent. No penalty. Something to think about if you are good at not spending.

[Zoe Girl]

I will check out the regular Ally savings rate. I was thinking about laddering because of the rates overall, I don't think I would have an issue with spending it here and there if it was more available however.

How do you get the savings in Ally out quickly, like an emergency? I don;t have a credit card until after the bankruptcy is paid off next summer. So maybe I should wait until after I can get an emergency credit card to move the money. Having an older car I feel the need to access money for a tow or quick repair.

[nswef]

They'll send the money to your other bank where you write checks.

[kib]

Ally also offers a free checking account - no mimimum but basically no interest either. You could pretend Ally didn't exist unless you needed emergency cash, then go online and transfer money from savings to checking. It would be available in the checking account immediately to write a check against. So maybe complicated enough not to spend it "here and there", but still pretty simple and free to get at if you need it.

[Zoe Girl]

I am going to look to change my checking account once my bankruptcy is paid off, next summer. Until then I pretty much need to stay with my current banks. They don't check too much for an IRA, but with a checking account I need to get some things in better shape. The BK is a chapter 13 which I feel better about (I did it because I needed to legally protect myself from my ex-husband otherwise I would have just worked out the one debt I had an issue with), but it takes longer to clear and you can't pay ahead.

[kib]

I could be wrong, but I don't think Ally does special background checks for checking accounts ... not sure, but I believe once you have a savings or a cd you can simply add on another account. What I'm suggesting is that you have a second checking account with Ally simply to make accessing your emergency fund easier, not that you do your main banking there. I know it can get too complicated, but sometimes separate banks for separate functions keeps things cleaner.

[rosarugosa]

I've started building a small CD ladder (two rungs so far) with Barclay. They're paying 2.25% on a 5-year CD, and their online savings account rate is 1.0. I left Capital One for Ally, and then Ally for Barclay. Granted the difference is small, but it adds up over time, and I'd rather have a little more than a little less.

[Rogar]

I had a couple of longer term CDs come due recently and I've put them into 6 month CDs hoping that interest rates might edge up a little more next year. I've tried to outguess interest rates in the past and haven't been very successful, but I keep trying. The Ally saving rate seems pretty attractive, but chasing the most attractive interest rates among the different banks is not something I like to do. I'd just as soon as few people have my personal information as practical and bank at the brick and mortar bank in my neighborhood. Just old fashioned thinking maybe.

[Zoe Girl]

I agree with not having too many financial institutions. I like my credit union and my bank, but the rates on any type of CD or savings were so low it was crazy. So even if I see a slightly higher rate I am sticking with Ally. I had researched rates but also the bank ratings when I moved money there. I got a slight increase for customer loyalty as well.

[kib]

I agree with not having too many financial institutions. I like my credit union and my bank, but the rates on any type of CD or savings were so low it was crazy. So even if I see a slightly higher rate I am sticking with Ally. I had researched rates but also the bank ratings when I moved money there. I got a slight increase for customer loyalty as well. Yes ... I've found for some reason the rates in the southwest are abysmal. I know they're bad everywhere, but I've had two midwestern credit union accounts pay more than 3% in the last few years, whereas around here .1% is the best I can find for a brick and mortar bank. I'm just not willing to "pay" BOA $300+ a year in lost interest!

I've come up with a personal formula about chasing rates. I have cds with a few banks that are known to be competitive - Discover, Ally, Cap 1 360 (Ing). When I open a new cd, the return has to be at least $100 more than I would get at any of those, otherwise I choose the best between them. And I also check government treasury rates. They're a huge pain to redeem before maturity, so that's for stable long term stuff.

It IS a pain keeping track - not so much with the long terms but definitely any day to day or short term banking. But I'm retired, so it's a little different, I consider the investments my job.