IRA Investment Strategies
A couple of days ago the market was up 140+ and a few days later down 200+. Are you tired of this roller coaster?
If your at, or nearing retirement and want to take the risk out of your retirement portfolio then consider investing in bank/credit union Certificates of Deposits (CD).
This site, and blog are designed to try and help the unsophisticated investor take advantage of a federally insured investment option. You can protect every penny that you have and earn a small return on your money. By using some of the tips in this site you can improve those earnings.
Please search through the material. I have tried to be as clear as possible, however, if you have a question please feel free to post it. I will responde as I can.
Melrose CU progress
Got forms and disclosures from Melrose. One of the shortest fee schedules I have ever seen for a financial institution. Also some of the lowest fees.
Membership in the credit union is open to anyone. This is different from most other credit unions that have a specific industry(s) or geographic areas that they serve. It doesn't matter were you live or work.
They also have a 5 star rating from www.bauerfinancial.com which is the best you can get.
Rolling a maturing CD to them was a simple process requiring an IRA application, a beneficiary designation and an investment selection. Got a check from the old holder of the IRA CD made payable to Melrose FBO IRA (my name) and sent it to Melrose.
If you don't need to physically go to the bank, this might be a good institution to do your banking through.
Appreciate any feedback on this credit union.
Great CD rate 3.91%
Found a 3.91% APY on a 5 year CD at Melrose Credit Union. Was able to complete the application on-line and get an acceptance notification e-mail shortly afterwards. Had to print the application for membership and mail it in with a $1 membership fee and a $25 share (savings) deposit. Will be interesting to see if they will honor the rate in two weeks when my current CD matures. I have made that request on the application. Will let you know what happens.
The reason I am looking at a 5 year CD is because I built a ladder starting in the fall of 2007. A piece of it matured several weeks ago and I was able to get 3.75% at Mechanic's Cooperative Bank in Taunton, Mass. This next piece that matures on 9/12 will probably go to Melrose Credit Union. Their financial statement is on their website and looks very strong.
Two more examples of small institutions offering better rates than the big guys.
Check back in a couple of weeks to see how I made out. Also, would appreciate any feedback from those who have done business with Melrose CU.
It pays to ask
I had a CD maturing last week. One of those I was Laddering over 5 years, since the fall of 1987. Wanted to put it into a 5 year CD at the best rate I could find. Had found a great rate of 3.75% at www.Mechanics-Coop.com but when maturity date came the rate had been dropped to 3.50% two days before. I asked branch manager for the higher rate, he made a call, and I was given the higher interest rate. That was a 7% improvement in the rate of return on this CD.
Lesson learned, ask and maybe you shall receive.
CD Risks
What are the Risks with a CD?
The risks associated with investing in CD's are different than the risks of most other types of investments but it is best to understand them before moving forward. The first risk is that you are committing your principle into the banks care for a specific period of time. The amount of time is selected by you, but the bank expects to have your money for the full term you have selected. If you want, or need your money sooner there is a potential penalty that you must pay. This penalty can possibly cost you some of the original amount you gave the bank or credit union (see Types of CD penalties). There are ways to minimize the possibility of loss from this situation that you should consider (see Minimize CD penalties).
There is also the risk that the interest you will earn on the CD will not be as much as you might earn in the stock market through a mutual fund or direct stock investment. When the stock market is strong the earnings potential usually exceeds the rates that banks are willing to pay for CD deposits. When you make a commitment to a CD for a specific term and amount you cannot take advantage of higher future CD rates until your current CD matures (reaches the end of the time you agreed to keep it on deposit). This means you might be kept from taking advantage of higher interest rates in the future. To give yourself greater flexibility sees "What is laddering of CD's".
Another risk of investing in a CD is that you might need some of the money for an emergency and now it is tied up at the bank/credit union. The possibility of this becoming a problem and causing you to incur penalties can be minimized by taking a few simple steps (see Minimize CD penalties).
The only other risk that you might face is that the bank/credit union in which you have made your deposit "fails" and is taken over by a government agency or another bank. If your bank is taken over by another bank they must honor the terms of your original agreement. There is little or no risk in this situation. Make sure to keep all your paperwork ready should this possibility arise. If your bank/credit union is taken over by a government agency (FDIC or NCUA) then your deposits are insured with some exceptions (see Federal Deposit Insurance and Other insurance under CD Rates & Insurance).