Vanguard and Fidelity do make money with built in management fees, but the quoted yields for brokered CDs are the actual yield that you will receive. There is no separate fee to have an account with these companies. A bank can only offer you CDs that they have created. But, Vanguard and Fidelity have access to thousands of products from thousands of sources. An individual bank cannot compete for yields with Vanguard and Fidelity.

That may be true but how many of those products are international and not FDIC insured. Local institutions tend to be very invested in their communities and country for the greater good of the people and their financial needs. To each their own and no one is calling my investment is a plus.

There are choices......
 

The Fidelity site has a list of banks for their brokered CDs. As you look at the list, you will see names of banks you know and there will be some whose bricks-and-mortar you mght drive past every day. Yet, you will not get the same rate by walking in the door.

You can choose call-protected or not. And the FDIC insurance is there.

I cannot figure out though how The Bank of China is FDIC insured, but it looks like BOCNY is based in NYC and somehow has the insurance and has had it for years. But you can just buy American banks. There are lots of choices on the list. You get to pick the bank(s).

Boomer

For the small difference, I prefer to walk into my local S & L or bank. It’s less hassle and they match advertised rates in the area. It’s more convenient when RMD time rolls around and at this point in our lives, we’re tired of the treadmill and simple is our goal.

Keeps going up. No reason to lock in long term


3mo 6mo 9mo 1yr
CDs (New Issues) 4.90% 5.00% 5.25% 5.40%

BONDS
U.S. Treasury 5.14% 5.27% 5.32% 5.36%

It was grandfathered in back in 1981.

In the past I have purchased FDIC insured CD's from Bank Hapoalin (Israel), State Bank Of India as well as the Bank of China.

I rest my case.

It is too bad that these rates are a result of the Fed trying to play catch-up with inflation……when they have let stupidly low rates ride for years and years. That simply could not continue and now we are seeing the fallout.

But, hey, I will take these CD rates and play the short-term game. I recently bought Schwab and Truist and will be shopping again soon. (I did not buy into the BOC because I simply did not want to. I had looked up that FDIC thing for them just to see WTH? It has been there a loooong time.)

To each his/her own though. I understandand, and I would never try to tell anyone else where to put their money. If they ask me, I do share a very general idea of what I do.

We all have our own risk tolerance and we should behave accordingly. I have only 2 rules for when it comes to where to put money: 1.) Know Thyself and 2.) Understand what you are buying.

Boomer

FDIC insurance has never made sense to me. The limit is $250K per account, but you can set up about 4 or more different accounts with different names and account types and easily get millions in coverage. And if you want more coverage, you can just open accounts in different banks. Apparently, foreign banks can sell FDIC insured products if they do business in the U.S. Obviously, the Government doesn't care about protecting taxpayer money with reasonable insurance limits. Personally, I don't think FDIC insurance is very important as long as you spread your investments around and diversify.

This is a cite from 2014 so not current. Probably a lesser ability to compensate savers exists today.

"The FDIC currently has far less money in its fund than it has insured deposits: as of Sept. 1, about $41 billion in reserve against $6 trillion in insured deposits. (There are over $9 trillion on deposit at U.S. banks, by the way, so more than $3 trillion in deposits is completely uninsured.) "

Is your money safe at the bank? An economist says ‘no’ and withdraws his | PBS NewsHour

This is more current and from the horse's mouth so to speak.

"The DIF balance has risen every quarter since the end of 2009, and stood at a record $119.4 billion on March 31, 2021, up from $110.3 billion at the end of 2019. The reserve ratio stood at 1.25 percent at March 31, 2021, down from 1.41 percent at the end of 2019."

From: FDIC: Insurance Program

If >$41B needed......................it's called printing money.

The $250,000. is somewhat of a pain but it spreads the risk if one bank fails. If everyone dumped all their money in the overly generous interest rates and low loan rates bank and it fails, the overt risk is obvious. As Wilson points out, the Fed can print money to cover FDIC. I’m old enough to remember the generation which lived through the Great Depression and saw some of the worthless stock certificates they were left holding. Their savings were decimated.

I just took a quick look at brokered CDs and saw that they seem to be creeping down a little this week. There are not as many at the 5% mark.

Is anybody else wondering if the window on the 5% might be closing? The list of those available is definitely a lot shorter than it was a couple of weeks ago.

Boomer

Why open a CD ? especially at place like this
 

Instead get a short term 6 months or 1 year T Note,,Treasury Notes make more sense and are the safest investment u can make

GM Rightnotes just increased their payout from 4.75 to 5%. This is not a CD. It is more like an interest bearing account. Interest accrues daily with no minimum time period. Easy to to deposit/remove money online to your bank account using online ACH transfer. It is not FDIC insured so if that is important, this is not for you. It is administered by Mellon Bank for General Motors

If you want any portion of your money back, you go online and set up the redemption amount and your money is deposited into your account on the next business day.

The interest rate on my Vanguard money market account is still increasing. It is now 4.77 percent. That is way better than the 0.01 percent I was getting for several years. And, because about 65 percent of my portfolio is bonds and cash mutual funds, my investment income has greatly increased. I don't see the need to buy CDs.

Recently I have been moving cash into SWWXX, an AMT free muni money market fund currently paying 3.79% tax free.

6 month T-Bill today is 4.88% at Schwab.

Funny you should say that. I was thinking the same thing — sort off…..

New money just in, sitting in a money market at a 4-plus something rate. Thinking of leaving it alone. Not sure yet though……

I do have a question about those brokered CDs. They are new to me. Bought a couple of short terms a few weeks ago. I get FDIC and call - protected……..

But am I understanding correctly that if the brokered CD does not compound, and instead pays all the interest income at the end of the term, that does not throw all the taxable interest income into 2024 if going out long term? If not, why not? It seems like being taxed on money you did not get — yet. Huh? That makes no sense to me. Maybe I misunderstood.

Am I right or wrong on that? If the taxing is along the way while the interest is not paid yet, how can that be?

Boomer (who is not sure if she heard that right)

A typical CD earns taxable interest annually, even if the CD does not pay the interest to the CD owner. So, you get a 1099-int every year and must pay tax on it. It doesn't matter when the interest is actually paid to the owner. This would also apply to a brokered CD.

I think that some banks will allow you to withdraw interest earned at any time without paying a penalty.

Thanks. It has been so long since I have had CDs, and I never took interest along the way, but it did appear on statements, as I recall.

I thought these brokered CDs seemed like they paid lump sum interest or some such thing. Still seems weird to me, but thank you for verifying that it just is.

Boomer

I'm not sure how to figure that .11 expense on the vanguard MM when comparing it to the CDs. But it seems the safest right now and my funds are available. Any idea what the expenses are on Vanguard CDs?

I use the Cash Reserve Federal Money Market Admiral fund. The current yield is 4.78 percent. The expense ratio is 0.1 percent, but that is built into the share price, so the actual yield is 4.78 percent.

For CDs, Vanguard doesn't charge anything for new issues, but there is a $1 fee per $1,000 to purchase a secondary CD (not a new issue). You can now get a 5 percent or higher yield with a Vanguard brokered CD. Vanguard's fees for most products are so low, they are hardly worth computing.

Note, if you want to increase your overall yield a little bit, consider putting about 15 to 20 percent of your savings into the Vanguard High Yield Corporate Bond fund. Somewhat risky, but it is currently yielding 7.02 percent.

Synchrony Bank online has a 14 month CD at %5.00 with no minimum. Shop around.

[QUOTE=dewilson58;2196114]If >$41B needed......................it's called printing money.[/QUOTE

Then the inflation rate will be astronomical. Which, doesnt bother me personally much, i love the higher interest rates that come along with it but worry about Generation Z.:pepper2:

Wooooo...You're a risk taker! 80%ish of Vanguard Corp Bond fund is BBB to B. But i am looking for more risk with a portion of my portfolio.....so i'm mulling over. I'll give my fiduciary a heart attack...lol