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Author: auctionnoodle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 883921  
Subject: ING CD's Date: 4/11/2006 6:53 PM
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Does anyone have ING CDs? The e-fund thread got me thinking that maybe I should seek a higher interest place for my long term efund money.

I have ready access to my money within a few days when it's at ING savings. For the difference (4% vs 4.45%) is it worth it to buy the CDs?

Is there a better option? How do I keep track of the CD's (presumably they show up in my ING account)? What if I buy CD's or bonds or whatever from somewhere else - then what is the best way to keep track of it?

I think what you all have done is make me think thru my e-fund plans a little better instead of just having it in one big pot that i use as needed.

-Noodle
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Author: coombe00 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700949 of 883921
Subject: Re: ING CD's Date: 4/11/2006 8:55 PM
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You can get 4.5% through Emigrant right now.

Personally, with the rates rising the way they are, and *my* definition of the e-fund, I'd rather keep it there than in a CD -- easy access being what it is :-)

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Author: auctionnoodle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700951 of 883921
Subject: Re: ING CD's Date: 4/11/2006 9:42 PM
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Ah....you raise a good point, which is why I remember having not done CD's in the past. Just seems like there should be some place better for it, but maybe there isn't.

-noodle

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Author: thatfoolpeter Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700953 of 883921
Subject: Re: ING CD's Date: 4/11/2006 10:09 PM
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What about creating a CD ladder with 6 month CDs. I've been toying with this idea myself. I'm building up the efund slowly so only a fraction of my monthly expenses is getting stashed in CDs at this time. I may adjust some once I have several months of expenses put away.

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Author: auctionnoodle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700962 of 883921
Subject: Re: ING CD's Date: 4/11/2006 10:57 PM
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It seems the ladder would work to give you better interest rates as they go up. You'd earn a small amount more than if you just kept it in ING savings. (just thinking out loud here). I am not interested in going to Emigrant Bank because of some negitive things I have heard as well as already haveing ING account and trying to keep money in fewer places.

So, let's see. If I did my math right, if I invested $1000 in ING Savings at 4%, I'd have $20.17 at the end of 6 months. If I put the same amount into a CD, I'd have $22.46. Not a huge difference. But, it's still free money - however, it just doesn't seem like enough to go thru the trouble. So, for fun (cause I've been laying sick on this couch for 2 days), let's say it's not $1000 invested...it's $15000.

Then, at 4% I would have $302.51 at the end of 6 months and at 4.45%, I'd have $336.86. Ok, so still just over $30 difference over a 6 month period. Doesn't seem worth it, does it?

Maybe worth looking into a 12 month CD. After all, this is supposed to be money you aren't going to use unless real disaster strikes. If you buy one each month, it's still giving you access to your money each month - as long as you know you have to wait at least one year to get that access.


Still, 12 months CD's at ING are paying $359.79 on $15000. So, tying money up for that year yeilds you $23. Not going to make me rich :(

Thanks for letting me talk this out, it helps with my boredom.
-Noodle




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Author: thatfoolpeter Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700967 of 883921
Subject: Re: ING CD's Date: 4/11/2006 11:24 PM
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Ok, so still just over $30 difference over a 6 month period. Doesn't seem worth it, does it?

I dunno, it took my <5 minutes to set up the CD. $30 for 5 minutes worth of work? Not too bad. Again, if you set the ladder up correctly you won't be more than ~30 days away from a CD maturing and in a true emergency, would be able to cash in at least three of six CDs without losing principal.

Doesn't seem worth it? Free money is free money! If it's sitting around in your savings, why not?

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Author: bluemorpho Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700970 of 883921
Subject: Re: ING CD's Date: 4/11/2006 11:50 PM
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ING CD's are very easy to set up. They show up on the same page as your list of other accounts. In the past year they've added 6 and 9 month CD's (good for us because DH is paid 9 months out of 12, with a summer vacation from paychecks). If you think interest rates are going to keep going up fast, stick with shorter terms, but consider that in a year from now a 5-year CD's rate should be compared to the going rate for a 4-year CD at that time. Do read about the penalties for early withdrawal--though beware that ING can change (and has changed) the penalty. I'd only tie up money that's for unanticipated emergencies or for things that are definitely further in the future than the term of your CD.

BlueMorpho

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Author: auctionnoodle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700971 of 883921
Subject: Re: ING CD's Date: 4/12/2006 12:10 AM
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So, if i set them up at ING, do they automatically renew on their anniversary date or do i have to remember to do something? Then, I assume when they renew, they get the new (and probably improved) rate.

I guess I will have to think more about this when I feel better and it's earlier in the night. I need to figure out if I want a 6, 9, or 12 month, if any.

Plus, if they do auto renew and I don't want one to, what do i do to stop it? It looks like the interest can be deposited directly into my ING Savings account, which is nice. Is the CD interest taxed the same as savings account interest?



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Author: NoSpin Two stars, 250 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700985 of 883921
Subject: Re: ING CD's Date: 4/12/2006 2:35 AM
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I posted the following on a previous thread:
http://fireboards.fool.com/Message.asp?mid=23913847

Note: You can sell before the term. I think you will lose some interest but not as much as the penalty for CDs.

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Author: FoolYap Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700990 of 883921
Subject: Re: ING CD's Date: 4/12/2006 7:42 AM
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The thing that has kept me over the past couple of years from shifting money from my ING savings account to ING CDs has been how rapidly and regularly savings account interest rates have been rising. The spread between savings account rates and 6 month CD rates often vanishes over the term of the CD.

Longer-term CDs offer a higher rate, but then I'm at even more risk of having the savings interest rate exceed it before it matures, IMHO.

If I thought there was any serious chance of rates declining over the next couple of years, I'd feel differently about it. But right now, it appears a fairly safe bet that rates will head farther up before they head down. So for me, keeping my money parked in a savings account, where it's maximally accessible and gets rates that adjust up, seems the better way to go.

--FY

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Author: TVKFool Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700991 of 883921
Subject: Re: ING CD's Date: 4/12/2006 8:06 AM
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how rapidly and regularly savings account interest rates have been rising

do they really rise that rapidly. I mean right now 6 month CD is 4.5% APY and as of next week the savings apy is back to 4%. Will the interest rate rise by more than .5% over 6 months? If it won't, then you're ahead, even if it's less than you can predict right now. Free money is still free money.

I opened my ING account last fall, and that point the interest rate was 3.5 so that's only about .5% growth in about 9 months.

-TVK

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Author: stevenjklein Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700997 of 883921
Subject: Re: ING CD's Date: 4/12/2006 8:37 AM
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Will the interest rate rise by more than .5% over 6 months? If it won't, then you're ahead...

Actually even if they do you'll still be ahead.

With a CD, you'd get 6 months of 4.5% interest. With a savings account that starts at 4% and rises to 4.5% over the same period of time, you'll get less than 6 months of 4.5% interest.

What if the rate goes up more than 0.5%? You'd probably still be ahead with a six-month CD. Here's how a $1,000 6-month CD would perform:
Month    Balance     Rate    Interest
January $1,000.00 4.50% $3.75
February $1,003.75 4.50% $3.764
March $1,007.51 4.50% $3.778
April $1,011.29 4.50% $3.792
May $1,015.08 4.50% $3.807
June $1,018.89 4.50% $3.821
Final
Balance: $1,022.71
Now, what if you put your money in savings, and the very next month it went up to 4.25%? And what if it increased by 0.25% every other month? Here's how $1,000 in savings would perform over the same period of time:
Month    Balance     Rate    Interest
January $1,000.00 4.00% $3.333
February $1,003.75 4.25% $3.553
March $1,007.51 4.25% $3.566
April $1,011.29 4.50% $3.789
May $1,015.08 4.50% $3.803
June $1,018.89 4.75% $4.030
Final
Balance: $1,022.08
Even though the final rate was higher than the CD rate, the savings just couldn't catch up fast enough. Of course, at the end of that six-month period of time, CD interest rates will likely again be a half-point ahead of the savings interest rate.

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Author: stevenjklein Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 700998 of 883921
Subject: Re: ING CD's Date: 4/12/2006 8:41 AM
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Whoops! I didn't copy and paste the right numbers for the 6-month savings account.

(The totals were correct, but the monthly amounts were wrong.)

Here are the two accounts again, with the correct numbers:
6-Month CD
Month Balance Rate Interest
January $1,000.00 4.50% $3.75
February $1,003.75 4.50% $3.764
March $1,007.51 4.50% $3.778
April $1,011.29 4.50% $3.792
May $1,015.08 4.50% $3.807
June $1,018.89 4.50% $3.821
Final
Balance: $1,022.71

6-Month Savings Account
Month Balance Rate Interest
January $1,000.00 4.00% $3.333
February $1,003.33 4.25% $3.553
March $1,006.89 4.25% $3.566
April $1,010.45 4.50% $3.789
May $1,014.24 4.50% $3.803
June $1,018.05 4.75% $4.030
Final
Balance: $1,022.08


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Author: DonnaPawl Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701005 of 883921
Subject: Re: ING CD's Date: 4/12/2006 9:14 AM
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Hi Noodle,

I'm a very happy camper over at ING. As you probably were able to glean from the replys, opening a CD at ING is rediculously easy if you already have a straight savings account. A couple of keystrokes and you're done.

We (DH and I) each have an ING account and we both have CDs as well. I wouldn't recommend the longer term CDs at this time because the max rate is only 4.8% for 60 months and the savings account is already at 4%. We each have laddered CDs which were set up over a year ago (before the interest rates started their slow climb) with maturities out to 2010. Once I saw the steady interest rate climb starting, I pulled back to only opening CDs for a max of 18 months. The first of the lower return CDs will be maturing in a few weeks and we have a home renovation project in the works. Therefore, I won't be rolling these into more CDs. However, all funds not needed by our renovation project will be moved into 6 or 9 month CDs. Looking at the CD interest spread, I see no justification for going longer.

JMHO~YMMV

DP

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701010 of 883921
Subject: Re: ING CD's Date: 4/12/2006 9:42 AM
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You might consider I-bonds. Current issues are paying 6.73%. The normal maturity is 5 years, The penalty for early redemption is giving up the most recent three months worth of interest earned.

If held longer than 12 months, that extra two percentage points more than makes up for the three month interest penalty should you redeme early, relative to a CD paying two points less. Once you're up to two years, even with the three month penalty, you are way ahead of the CD.

Consider all the qualities of an I-Bond before you make the decision though. Don't just go on what I've said here. You can read all about them, and even buy them at, www.treasurydirect.gov

xtn

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Author: FoolYap Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701016 of 883921
Subject: Re: ING CD's Date: 4/12/2006 10:14 AM
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do they really rise that rapidly. I mean right now 6 month CD is 4.5% APY and as of next week the savings apy is back to 4%. Will the interest rate rise by more than .5% over 6 months?

Over some six-month periods in the past couple of years, yes. It's been pretty darn close on others. Here's what I see if I look at the "e-statements" of my account since May 2005:

May 2005: 3.00%
Jun 2005: 3.00%
Jul 2005: 3.05%
Aug 2005: 3.25%
Sep 2005: 3.35%
Oct 2005: 3.40%
Nov 2005: 3.50%
Dec 2005: 3.70%
Jan 2006: 3.80%
Feb 2006: 3.80%
Mar 2006: 3.85%
Apr 2006: 4.00%

I salute anyone who pursues the extra interest that can be accrued. I'm just saying that I'd prefer not to worry about interest penalties if I need to withdraw the money, and I'm not really losing much by keeping it in a regular savings account.

--FY

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701022 of 883921
Subject: Re: ING CD's Date: 4/12/2006 10:43 AM
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You might consider I-bonds...

If held longer than 12 months


There's no "if" about it. They can't be cashed before 12 months unless you're in an area declared a Federal disaster area.

rad

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Author: wrc1000 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701026 of 883921
Subject: Re: ING CD's Date: 4/12/2006 11:02 AM
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ING CDs - very cool (and very easy) ! ! ! !

I have $6,000 in ING savings - just setup a 6-,9-, & 12-month CD ladder ($1000 each CD).

Left the other $3000 in the saving (for now).


- Billy

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Author: KenAtPcs Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701027 of 883921
Subject: Re: ING CD's Date: 4/12/2006 11:03 AM
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You might consider I-bonds. Current issues are paying 6.73%.

For the first six months ONLY.

Consider all the qualities of an I-Bond before you make the decision though. Don't just go on what I've said here.

xtn is very correct. Don't anyone be duped into buying I Bonds just because of the currently advertised high rates.

In reality, they pay only 1% plus an inflation adjustment. The current inflation adjustment was very high. The next one will be very low. We'll know exactly what the figure is next week. Right now, it's looking like maybe 1% (just a guess), giving a total annualized yield of 2% for the next 6-month period. 2% + 6.73% / 2 = You're better off in a MMA at EmigrantDirect or similar banks, where you can get your money out at any time, with no penalties or restrictions.

Don't get me wrong. I own a LOT of I Bonds. But the current 1% ones aren't much of a deal at all. And certainly nothing like the advertised 6.73% rate that unsuspecting people may think they're getting.

Ken

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701048 of 883921
Subject: Re: ING CD's Date: 4/12/2006 12:50 PM
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In reality, they pay only 1% plus an inflation adjustment. The current inflation adjustment was very high. The next one will be very low. We'll know exactly what the figure is next week. Right now, it's looking like maybe 1% (just a guess), giving a total annualized yield of 2% for the next 6-month period. 2% + 6.73% / 2 = You're better off in a MMA at EmigrantDirect or similar banks, where you can get your money out at any time, with no penalties or restrictions.

Don't get me wrong. I own a LOT of I Bonds. But the current 1% ones aren't much of a deal at all. And certainly nothing like the advertised 6.73% rate that unsuspecting people may think they're getting.


Ken I agree that is a high probability. I see inflation all around me, but I think the gubment fudges the numbers so they can look good (and have to pay less on I-Bonds ☺ of course).

You're math is incorrect though. The formula for the composite rate on I-bonds is as follows:

FixedRate + (2 x InflationRate)

xtn

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Author: KenAtPcs Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701066 of 883921
Subject: Re: ING CD's Date: 4/12/2006 1:22 PM
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I see inflation all around me, but I think the gubment fudges the numbers so they can look good (and have to pay less on I-Bonds ☺ of course).

They certainly do, to some extent. Especially with what they call "hedonics", attempting to account for improvements in the quality of products. For example, if the average auto price goes from $20k to $22k, but it contains more air bags, traction control, and similar extras, the inflation adjustment may actually go DOWN, despite the 10% hike in price.

You're math is incorrect though. The formula for the composite rate on I-bonds is as follows:

FixedRate + (2 x InflationRate)


Oh, if only they did give us 2x the inflation rate, wouldn't that be nice?

The discrepancy is in the definition of "InflationRate" above. In that formula, it is for 6-months, thus the multiplier. When I wrote "1%", I was giving an annualized rate for the 6-month period, thus already doubling it.

I'm being generous, by the way. The current annualized rate for the first 5 of those 6 months is NEGATIVE 0.1%. So inflation will have to be fairly high for the month of March to get it up to a positive 1% (annualized) rate. It is possible, though, due to the recent rise in gas prices (though a lot of that has been in April). As I said, we'll know for sure a week from today.

Ken

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701075 of 883921
Subject: Re: ING CD's Date: 4/12/2006 2:06 PM
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Oh, if only they did give us 2x the inflation rate, wouldn't that be nice?

The discrepancy is in the definition of "InflationRate" above. In that formula, it is for 6-months, thus the multiplier. When I wrote "1%", I was giving an annualized rate for the 6-month period, thus already doubling it.


Oh that makes perfect sense. Thanks.

xtn

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Author: bluemorpho Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 701111 of 883921
Subject: Re: ING CD's Date: 4/12/2006 5:41 PM
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ING CD's automatically renew at the new rate unless you take steps to prevent this. I name my CD's by the month they roll over, so every time I look at the list of accounts I know when each matures (If you end up with a ladder with multiple CD's maturing at the same time you could add the length of each in the name too--e.g. 4yr-6-10 for a 4 year CD maturing in June of 2010.)

To avoid the auto renew, just call before the renewal date or within a week (I think it's a week or maybe 2 weeks--read the fine print),and ask a representative to have the account rolled into your Orange Savings account when it matures. Or you can make some other arrangement such as a CD with a different term.

The CD interest accrued each year is taxed as regular income for that year. I let the interest compound, but still pay taxes yearly even on 2+ year CD's. ING will send you (and/or make available online if you use e-statements) a list of all your accounts and the interest each has earned after the first of the year. If you should cash in an account early and pay a penalty, I believe it's possible to get credit for taxes you might have already paid on interest you ended up forfeiting. (I haven't had to do that and am not sure how it would work.)

I've found it very easy to do all this--you just pay a penalty for undoing it before an account matures, so make sure you're willing to take that risk. Laddering or at least having multiple CD's allows you to limit the risk of interest loss, but I'd make sure to leave the money I'm likely to need soon in a savings account.

BlueMorpho

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Author: pircdefense One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 710014 of 883921
Subject: Re: ING CD's Date: 5/20/2006 10:47 AM
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Late to this thread, but http://www.bestcashcow.com/ is a great site that lists the best rates for savings accounts, CD's, etc. from all over, which makes it easy to compare. I found out about this site from fool.com, but figured this was a good thread to post it again.

Happy hunting.

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