Thursday, March 05, 2009

CD Maturity

I just had a 5-year CD mature. Often I'm pretty lazy about doing anything when this happens-- if you don't act, the bank just automatically rolls it over for the same term at whatever the current rate is. But given how things have been going lately, and how low interest rates are, I wanted to make sure I took a more careful look this time before the grace period for making changes expires.

And what a depressing look it was! The current CD rates at Chase suck, to be quite frank. For anything under 18 months, I'd only earn 0.25%. 18 months to 59 months is 1.0%. 60 to 120 months is 1.49%. I don't want to tie up money for too long at those rates.

I may just roll over the CD for 18 months, but I'll also be shopping around for better CD rates at other banks. The CD is a Roth IRA, but hopefully it won't be too complicated to roll it over into cash and then redeposit it-- I plan to call Chase today to find out! I tried to call the other day, actually, but perhaps because of the snow, their phone lines seemed to be tied up and I got sick of holding!

19 comments:

Optioned Unarmed said...

shop around for money market accounts at banks (which are FDIC insured). there are stable banks paying in the 2% range and you will have complete liquidity. no good reason to tie up money in CDs at such a low interest rate.

Sherri L said...

I'm in the same boat, I have one done March 31st...

CD rates are dismal... even for long term.

I'm really frustrated right now with the lack of conservative investment options -- I suppose that's a nice problem to have, but...

Let me know if you find anything good!

Mad Cat Mom said...

It's not terribly complicated to roll it from one bank to the other. Simply find the place you would like your money to land, go back to your bank and have them issue a check payable to:

Other Bank Name FBO Madame X.

Make sure you have them note in the memo field "Roth IRA."

Make sure you keep the carbon copy of the cashier's check and you're golden come tax time. The rule is that as long as the money is reinvested within 60 days you don't pay a tax penalty.

There is a second option as well that may give you more time beyond the 7 day grace period. You can roll it into an IRA Money Market account. It's exactly like it sounds and it usually pays roughly the same interest that the short term CDs pay. The benefit is that it's not locked up for the next 18 months at a dismal interest rate.

I usually suggest against anything more than 6-8 months when the rates are so low because you don't want to miss out when they pop back up and you're stuck in your .25% for another 12 months :)

wx27 said...

Is there a reason you have a CD in your Roth IRA and stocks/bonds outside? The tax-free benefits of the Roth account are best utilized on assets that will accumulate capital gains/have large income distributions. You should separate the asset allocation decision (% in stocks/bonds/CDs/cash) from the asset location decision (taxable vs tax-deferred/tax-free accounts).

mw said...

Check rates at credit unions; they're often better than banks, at least in this area (New England).

Madame X said...

Thanks for the suggestions all.

@ wx27-- I have 3 different Roth IRA accounts-- two CDs that I opened years ago with my very first Roth contributions, and a stock/mutual fund portfolio at E*Trade.

Slinky said...

Those are really horrid rates!! I just opened a 12 month cd for 2.15% at my local credit union. I didn't want to lock my money up longer than that. I'm hoping rates will start improving by that point.

Linda said...

I just recently did the same thing! Except I got my money out and now it's sitting in a regular savings account (which surprisingly - or maybe not so surprisingly - has higher interest rate than the CD). I looked around and found HSBC and CitiBank with decent CD rates but it became a hassle to open a new account. They wanted me to fax/mail in a copy of my SS card and my uility bill for address verification I guess. Seeing as to I have no printer at home (to print out online bills), this whole deal has been on hold. So annoying!

Thanh-Long said...

A ING Direct Saving account offers 1.65%. If you want a garanteed rate, a 18 month CD earns 1.50%

Venus said...

0.25%? That's crazy. Of course, with my 401k and investments losing 40% on average 0.25% still sounds good. I don't know how much liquid asset you have but have you thought of buying real estate with some other investors. I don't even know how feasible it is but some people I know decided to pool their savings and buy up a propert in Las Vegas - it was originally sold at 415k in 2005 and now they are getting it for 165k and turning it into a multi-family rental. Of course, this is an option for them because they have the extra $ to invest. They asked me but I wasn't in a position to participate - still, for a minute it made me think if I would do it if I had the option.

Gord said...

Preservation of capital is number 1. Liquidity is number 2. I'm old enough to remember term deposits paying as high as 18%! That was the early eighties. It came about because inflation went sky high because the government was printing money as fast as they could to get out of a horrid recession. Sound familiar?

Anonymous said...

A regular old ING savings account pays more in interest, and you can access it any time you want.

Anny said...

Just out of curiosity - how much was the cd rate that just ended?

Madame X said...

The old CD was 3.25%.

cara said...

MW said what i was going to! Credit Unions can usually do better rates than banks. .25% is awful! the lowest rate my CU has for CD's is 1% for a 3 month with a $500 minimum. a 12 month is anywhere from 2-2.5 %

McBrandon said...

Bank of America is offerring 2% 12 month CDs right now.

steve said...

If you have non-IRA money you need to have in a cash instrument, try putting it into SmartyPig. Last time I checked they are still offering >3%. Of course, I doubt it will last, but while it does it's better than locking in the going CD rates.

The other option is just to say, what the heck, it's a cash deposit--they aren't supposed to do much more than keep up with inflation (at best) anyways.

Tim said...

i just had a cd mature as well. i decided i just don't like cd's. i used proceeds to refurbish my cash on hand, buy lots of citi stock at $1, and some other stocks and mutual funds.

stuart said...

I also just renewed a 7 month CD with Hudosn City Savings at 2.60 for one year.