This thread is directed toward those who currently own CDs. I have used CDs extensively for almost 2 years now, watched CD rates go over 5%, but now CD rates are dropping. As my my CDs mature, I am hearing a lot of chatter about why it is not a good idea, to continue investing in CDs, because stocks and bond options are pretty much guaranteed to make more than CDs. In the last several weeks, I have chosen to buy some bank CDs at my personal bank for 5.25%, but my brokerage CDs are selling in the 4% ranges now, because the FEDs projected rate cuts.
Are any "current" CD owners still buying CDs, with cash that becomes available to you, from maturing CDs or other cash sources?
Comments
I’ll stay out of this discussion than. Just wanted to say that it’s nice to see CDs receiving some attention on the board.
I have had a couple gov. agency bonds get called recently. At 6%+, I new they weren't going to last long, but it was nice while it lasted.
YES, they look attractive. But no, I have not taken a bite. That might be the last base I try to cover, in constructing the portfolio to be the way I want it.
They offer security and liquidity and beat the low savings offered at our local CU. We have about 20% in Mutual funds and that makes us over extended if one uses the 100-age rule.
A change if our life style, Assisted Living, may be around the corner.
To make things simple for my wife and our heirs we have investments in only 2 firms. I am shortening our CD ladders to one year with many rungs.
The stability of the bank offering the CD is more important than a few tenths of a % in the interest rate.
Our pension and SS income is well greater then our current living expenses but would be gobbled up in a cared living facility.
I miss the “Investing After Retirement” forum on the M* of the olden days.
It seems to me more retirees commenting here than non-retirees. Maybe I'm off base ?
CD's at 3% would be my cut off point. Well , guess I'll have to wait & see if that will hold true !
Happy New Year to All, Derf
That's because the 5% tax clips 0.2% of the 4% CD yield, leaving 3.8%. That's about what you get with the I-bond assuming 2.5% inflation. If you're in a higher tax place (e.g. MN), or you expect inflation to remain higher than 2.5% for an extended period, then the I-bond looks even better.
I did buy some I-bonds. Though if I want to back out, I can sell off lower yielding I-bonds I also own. If I do that, I'm effectively swapping out lower yielding I-bonds ones for higher yielding ones, not adding to my I bond holdings. IOW, I'm able to buy the I-bonds without making a long term commitment.
I also recently purchased a callable CD in my (inherited) Roth matching my 2024 RMD. 5.35% (long gone), matures in 9 months, callable in 6. If it gets called, I take the RMD a little early. If not, I take the RMD at the end of September.
This is an example of a special circumstance where there's little downside in getting called, and a little upside in taking the callable CD with a better rate (about the same rate as I could have gotten on a non-callable 6 month CD).