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10-Year CDs @ 4%

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  • Just checked in with Schwab CD's 1 month up 46% 1% now 1.46% !
    1yr 2.9% -- 2yr 3.2%
  • @Derf. Thanks for the news!
  • edited June 22
    There does seem to be a bump in CD interest rates this week, apparently in response to the .75% Fed interest rate hike last week. There appears to be more movement in the shorter term CD rates (1 month, 3 month, 6 month, 9 month, 1 year), but a slight uptick in CD rates for longer term rates. It is a pretty good bet that the Feds will increase rates significantly during the remainder of 2022, so by year end, I am expecting 3%+rates to be pretty common for 9 month and 1 year CDs, and I think 6 month CDs will be much closer to 3%. When I look at CD opportunities, I look up the banks credit rating and only use banks with at least an "A" rating. I prefer CDs that pay interest on a monthly basis, but those are not as plentiful compared to CDs that pay the interest at the maturity date.
  • msf
    edited June 22
    Fixed annuity yields are finally back to being significantly higher than CDs. They are another option to consider - for IRAs, for savers over 59½, for people who will be at least that old when the contract penalty period expires.

    For example, instead of going out 10 years to get a CD yielding 4%, one can buy a 5 year fixed annuity ($10K min) from Reliance Standard (AM Best A++) yielding 4.05%.
    Reliance Standard 5 year annuity

    Unlike a CD that at best lets you withdraw interest w/o penalty, some fixed annuities like this one also permit annual withdrawals of up to 10% of the balance. And unlike a multi-year CD, there's no phantom income - the interest is tax deferred until withdrawn. Though there is a potential 10% IRS tax penalty if you don't satisfy an exception (e.g. over age 59½).

    A broker selling you an annuity takes a cut just as a broker does when selling you a CD. At maturity you get your full principal and promised interest. With either product.

    On the short end, Treasuries are looking good compared with CDs. Similar nominal rates plus exemption from state income tax.

    Current rates (CDs, Treasuries, and more) at Vanguard
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