Certificate of deposit ?

[rhinoabe]

My Mom needs to come up with some cash,and we all know that a Cd, doesnt pay crap. What does she look at loosing if she cashes in a cd early? She can get a loan without any trouble, but the interest rate will be higher than what the cd pays.

 

[SSGSAD]

The rest of the interest, and the penalty,

AFAIK .....

I am NOT Dave Ramsey .....

 

[rhinoabe]

Any idea what kind of penatily? I will have to take a day off work to do this, If it is very much I will just get a loan online .

 

[SSGSAD]

You, would have to check with whoever the cd, is with .....

 

[Cameramonkey]

I dont know what kind of numbers we are talking, but what about a credit card that has a zero interest balance transfer offer? Some of them allow you to write the check to "cash" to pay off a debt that cant be put on a card. (like another card) If she can pay it back within the 18 months or whatever the offer term is its free money. (or close, since its typically a 3% one time transfer fee)

If they ask, she tells them she owes a personal debt to an individual that does not accept credit cards. (Paying off a private loan. Worst case she makes it payable to you and you cash it for her.)

 

[MCINDIANA]

Give your banking institution a call and they will let you know what you will lose. Usually ... [h=2]For a CD with a maturity of a year or more, the typical early withdrawal penalty equals six months' worth of interest.[/h]

 

[amboy49]

Most credit card cash advances impose a fee of 3% or a small fixed dollar amount, whichever is higher. Not the cheapest way to obtain funds - even if interest free for x days.

Her money is always the cheapest money- especially with the current rates on CD's. She'll lose accrued interest based on the original maturity of the CD - but not more than 6 months interest. Has she been receiving checks or has the interest been left to accrue ?

Regardless, call the bank, S&L, or credit union and ask. Simple decision.

 

[rhinoabe]

Thanks they are all 18m Cds most of them are 3 months in. I am taking a couple of days off in another week I will check with the bank then. If we just loose what the bank paid us that is ok with me. I wouldn't have to do her taxes if it wasn't for her cds. I think I will just cash them all out and put them in a safety deposit box.

 

[CHCRandy]

CD's suck....but I guess they are safe. It's pretty easy to make 10%+ on money. I would turn them into good dividend paying stocks as they mature. How old is your mother? Wishing you folks all the best and kudos for helping your mother.....

 

[Leo]

It's pretty easy to make 10%+ on money. I would turn them into good dividend paying stocks as they mature

Really? That is sort of what the man from Putnam told me and as well as the man from Merril Lynch. Putnam lost me just short of 100K and Lynch lost me right at $270K. Lets throw in Pioneer, they lost me $40K. All were "low risk good dividend" stock portfolios. Every person in the industry likes to quote stats from before the depression. "Let it ride" they say. I have been riding 10-20 years, and guess what, my money is still gone.

I agree, CD's do suck, especially with the false inflation figures we have been under. "I" bonds were a good idea, but with the fiat declared zero inflation figures pronounced by the government, they are losers also. But none have been as big of losers as paying someone else to speculate my money in the stock market.

Being out from under debt is the best sure fire investment. The interest on debt is a perfect vehicle for taking your money no matter what economic conditions exist. And it is always at a higher rate than is routinely made in investments.

Whatever interest penalty the cashing the CD charges, it is still less loss than debt.

 

[CampingJosh]

Really? That is sort of what the man from Putnam told me and as well as the man from Merril Lynch. Putnam lost me just short of 100K and Lynch lost me right at $270K. Lets throw in Pioneer, they lost me $40K. All were "low risk good dividend" stock portfolios. Every person in the industry likes to quote stats from before the depression. "Let it ride" they say. I have been riding 10-20 years, and guess what, my money is still gone.

Were you into (bad) individual stocks or into something that mirrors the whole market?

If you're riding the S&P 500, there is no point between 10 and 20 years ago that you could have put money in, let it ride, and be down today. Even if you put it all in at the peak before the 2008 crash, you'd still be ahead something like 47% (78% if dividends reinvested).

The 2008 crash was bad, but the market has more than recovered.

 

[natdscott]

Regardless, call the bank...

-Nate

 

[Vigilant]

. I think I will just cash them all out and put them in a safety deposit box.

Careful putting cash in a safety deposit box, banks/.gov no likey! It isn't illegal, but they definitely frown upon it, and some banks forbid storing cash in a box.

 

[JettaKnight]

CD's suck....but I guess they are safe. It's pretty easy to make 10%+ on money. I would turn them into good dividend paying stocks as they mature. How old is your mother? Wishing you folks all the best and kudos for helping your mother.....

You're giving out investment advice, and you "guess" CD's are safe? You don't know? Forgive me if I ask for a detailed prospectus before following your investment advice.

Oh, is that 10% CAGR? And what sort of risk are you assigning to that handful of stocks? The OP's mom is probably around 80 years old and your advice is to throw it all into equities?!



moving on...

Thanks they are all 18m Cds most of them are 3 months in. I am taking a couple of days off in another week I will check with the bank then. If we just loose what the bank paid us that is ok with me. I wouldn't have to do her taxes if it wasn't for her cds. I think I will just cash them all out and put them in a safety deposit box.

Wait, what?!

OK, first, what's the problem with CDs and tax returns? You just fill that in on line 8A (line 2 on the EZ). The bank sends you a statement; there's nothing to think about.

Second, you're moving cash from an interest bearing (albeit small) and insured account to an uninsured box and it won't keep up with inflation; and in the process, forgoing any accrued interest because of early withdrawal penalties?

Tell me how this makes any sense whatsoever.

 

[JettaKnight]

Were you into (bad) individual stocks or into something that mirrors the whole market?

If you're riding the S&P 500, there is no point between 10 and 20 years ago that you could have put money in, let it ride, and be down today. Even if you put it all in at the peak before the 2008 crash, you'd still be ahead something like 47% (78% if dividends reinvested).

The 2008 crash was bad, but the market has more than recovered.

Here's the dirty little secret: on the whole, mutual funds underperform the market.

However, I agree that his money is not still gone, if these portfolios are truly 100% equities. My guess is his portofolio allocation is something of a blend.

 

[ziggy]

As a general rule, it is never a good idea to put all of your eggs in one basket, even if the basket is insured CD's. It may be too late in life for this man's mother to start investing in common stocks, but still putting it all in CD's creates the problem of having to pay a penalty for early withdrawal. A money market fund is a good option for part of her money. Try to find some good advise based on all of her circumstances.

 

[CHCRandy]

You're giving out investment advice, and you "guess" CD's are safe? You don't know? Forgive me if I ask for a detailed prospectus before following your investment advice.

Oh, is that 10% CAGR? And what sort of risk are you assigning to that handful of stocks? The OP's mom is probably around 80 years old and your advice is to throw it all into equities?!



moving on...


Wait, what?!

OK, first, what's the problem with CDs and tax returns? You just fill that in on line 8A (line 2 on the EZ). The bank sends you a statement; there's nothing to think about.

Second, you're moving cash from an interest bearing (albeit small) and insured account to an uninsured box and it won't keep up with inflation; and in the process, forgoing any accrued interest because of early withdrawal penalties?

Tell me how this makes any sense whatsoever.

Man, you almost sound butthurt. CD's are worthless...why tie up your money for 1% or less? If you can't make 10% on stocks a year.....you need to own CD's. I think for now I will take Buffets advice. Good Day.

 

[CampingJosh]

Here's the dirty little secret: on the whole, mutual funds underperform the market.

That's not a secret.

But with the market up as much as it is, claiming that the money is still in the market and is still down significantly is either (1) very unusual based on especially bad picks or (2) difficult to believe.

 

[JettaKnight]

As a general rule, it is never a good idea to put all of your eggs in one basket, even if the basket is insured CD's. It may be too late in life for this man's mother to start investing in common stocks, but still putting it all in CD's creates the problem of having to pay a penalty for early withdrawal. A money market fund is a good option for part of her money. Try to find some good advise based on all of her circumstances.

All true, but cashing out CD's early and paying a penalty just to avoid paying penalties...

Your advice is best applied to the future, not the present in this specific case.


I'm waiting for the OP to come back and explain his strategy.

 

[JettaKnight]

Man, you almost sound butthurt. CD's are worthless...why tie up your money for 1% or less?

One man's fiscal prudence is another man's butthurt. CD's are not altogether worthless. They are a decent vehicle for saving a small or modest money that is not needed in the short term with a guaranteed return.

If you can't make 10% on stocks a year.....you need to own CD's. I think for now I will take Buffets advice. Good Day.

You and I are at a stage in life where it's foolish not to invest heavily in equities (assuming a decent financial savvy, like yours), but this thread isn't about you and me, so please refrain from providing the same retirement planning advice that you would for person in their 30's. The OP's mother is at a stage in life where it would be foolish to invest over 20% in equities because your retirement should not include speculative growth at a very late period in life (e.g. you 80's).

Plus, if the OP is having trouble with the tax implications from a CD, do you really think it's wise that you advise him to go open up a stock account with a discount brokerage and start picking stocks?

Different strokes, for different folks.

Andsince you opened the door, what exactly is Warren Buffet's opinion of those dividend stocks you love so much? I assume you don't hold shares of Berkshire Hathaway (A or B).