INOVA Drops Rates on 6-Year CDs

Update: INOVA has slashed its rates, so their 5-year and 6-year CDs no longer are competitive with the PenFed CU 5-year and 7-year CDs.

My shortest blog post ever ... INOVA credit union recently dropped the rates on their 6-year CDs. They now match the rates on their 5-year CDs, so now I would go for the 5-year CDs unless you think rates are going to stay this low for more than five years. Here are the current rates (APY):

• Taxable 5/6-Year CDs: 2.10%
• Taxable 5/6-Year step up CDs: 2.00%
• IRA 5/6-Year CDs: 2.20%
• IRA 5/6-Year step up CDs: 2.10%

The rates are still competitive with the PenFed CU 5-year CD at 2.00% APY, and the Ally Bank 5-year CD at 1.74% APY. The PenFed CU 7-year CD is a better deal if you hold for at least about four years. The break even point with the Ally 5-year CD (if doing an early withdrawal) is about two years. The step-up option still is a nice sweetener. See my recent posts for more details on the INOVA CDs.

Reward Checking Accounts

I've mentioned Reward Checking Accounts in previous posts, but I think the subject deserves a post of its own. I think a reward checking account could be the best place to stash your short-term savings, up to $10,000 to $20,000--if you are OK with the monthly requirements to get the high interest rate. If you don't meet the requirements in a particular month, you will get a much lower interest rate for that month. Read on for details.

INOVA 6-Year CD: An Update

Update: INOVA has slashed its rates, so their 5-year and 6-year CDs no longer are competitive with the PenFed CU 5-year and 7-year CDs.

I discussed the INOVA Federal Credit Union 6-Year CD in my last post. In this post I share the conclusion of the process of transferring money from my existing IRAs into my new INOVA IRA, provide some contact information, and answer a few more questions about INOVA.

INOVA 6-Year CD

Update: INOVA has slashed its rates, so their 5-year and 6-year CDs no longer are competitive with the PenFed CU 5-year and 7-year CDs. There is no longer a reason to read this post other than for some general background on why to consider CDs; e.g., the Why I Am Doing This section.

I’ve run across another CD I like: the INOVA Credit Union 6-Year CD. It pays about 2.50% APY, and the early withdrawal penalty (EWP) is only six months of interest. I am transferring funds currently held in IRA money market accounts (paying almost no interest) at Vanguard and Fidelity into IRA CDs at INOVA CU. Following are more details on the features of the CD, comparison to other CDs I like, an explanation of why I am doing this, and a description of my experiences in opening the account and transferring the money into the CDs at INOVA. This is a long post, but hopefully you’ll appreciate the details.

I Bond and CD Update: February 2012

There have been some significant changes to I Bonds since my original I Bond post in May 2011 and my I Bond update in June 2011, and CD rates have continued to fall since my previous CD posts. Following is a summary of the I Bond changes, and my latest recommendations for how you might use I Bonds and CDs in your investment portfolio. If not mentioned here, the information in my previous I Bond and CD articles still applies, so refer to those for more details.

I Bonds: Part 2

I received a couple of questions about Series I Savings Bonds (I Bonds) since my last post. One of the questions was about interest rates, and the other was whether or not I Bonds were only a good deal if bought in May 2011. I’ll address these questions in this post, and also will cover a few additional I Bond topics; e.g., I Bond registration (forms of ownership), more on annual purchase limits, and purchasing I Bonds for a minor child or living trust. As always, if you have questions, please post a comment or email me at KevinOnInvesting@gmail.com.

I Bonds

There’s been quite a buzz lately in investing blogs and forums about I Bonds. The reason? The annualized interest rate for I Bonds purchased from May through October 2011 is 4.6% for the first six months. I’ll explain the details below, but this means that you will get a minimum return of about 2.5% if you buy an I Bond in late May of 2011 and sell it on May 1, 2012. This is a guaranteed, risk-free return that is much higher than any short-term, safe investment or savings vehicle, except perhaps for a reward checking account, and the interest is free of state taxes. The return could be even higher, depending on inflation during the second six months.

CD Update

Certificate of Deposit (CD) rates have decreased a bit since I first wrote about the Ally Bank 5-year CD and the PenFed 7-year CD. As of today, the Ally Bank 5-year CD APY is 2.40%, and the PenFed 7-year CD APY is 3.25%. The Ally 5-year CD still works well for taxable accounts, but I now prefer the PenFed 5-year CD at 2.75% APY for IRA accounts because of the smaller early withdrawal penalty (explained in more detail later).

PenFed 7-Year CD

I recently initiated the process to do a partial rollover (transfer) from a money market in my Fidelity IRA account to a 7-year IRA CD at Pentagon Federal Credit Union (PenFed). The CD rate is 3.5% through the end of November 2010, and the withdrawal penalty is one year of interest (if you withdraw funds from the CD before one year, you sacrifice all interest, but get all of your principal back). Following is a summary of my experience with PenFed so far, and the reasoning that led me to go for the PenFed CD.

Ally Bank 5 Year CD

With interest rates so low, one of the best deals for fixed-income investing in a taxable account is a 5 year CD from Ally Bank. One advantage of Ally CDs is that the penalty for early withdrawal is only 60 days of interest, as compared to 6 months to 1 year of interest at other banks and credit unions. Currently Ally Bank doesn’t offer CDs for IRA accounts (although they plan to in the near future), so the 5 year CD I’m recommending only makes sense if you have quite a bit of money in a taxable account. Following are some more details about why this CD might make sense for some of you.

Stocks, Bonds, Markets

This article is a primer on stocks, bonds and their respective markets.  It's not necessary to understand all of this material to be a successful investor; this is intended for people who are interested in building up their knowledge of the fundamentals of investing.