Reinvestment Ideas From An Expiring CD: Stay Mostly Conservative

Reinvestment Ideas From An Expiring CD

Are you looking for reinvestment ideas from an expiring CD? You're in the right place because I've invested in a bunch of CDs in the past. And each time they've come due, I've had to figure out how to reinvest the proceeds at various stages of the economy.

I've always aimed to consistently invest 5% – 10% of my net worth in low-risk investments so I'll never have a liquidity crunch. Taking advantage of a bull market is what the other 90% – 95% of my net worth is for.

Once you've got a nice financial buffer, you're more free to take on risks in your investments, career, or business. And sometimes, those big risks pay off in spades. Think about it. What type of moves would you make if you knew you wouldn't end up in abject poverty thanks to your savings buffer?

Maybe you'd be more willing to negotiate a raise and a promotion without fear of rebuke? Maybe you'd be more willing to join a promising startup for less pay, but more equity upside? Or maybe you'd have more courage to negotiate a severance to start your own business.

In my case, having risk-free investments gave me the confidence to leave my job in 2012, buy a 3rd SF property in 2014, and start a family in 2017. Don't look down on Certificates of Deposits.

Having liquid courage is huge for living a better life and taking more risks. After such a long bull market since 2009, stocks are expensive and volatile. You want to keep all your gains you've made over the years, not lose them!

Reinvestment ideas after a closed CD

Reinvestment Ideas From An Expiring CD

When it comes to investing, it's important to compartmentalize your money for maximum purpose. After all, if there is no objective, then there's no reason to delay consumption now instead of waiting for some future greater reward.

The purpose of CD money is so that you can:

  • Sleep better
  • Have guaranteed money up to $250,000 / $500,000 per individual / married couple
  • Keep up with inflation
  • Maximize your cash return
  • Always have a slug of cash coming in if you set up a CD ladder
  • Better cash management for large future expenses e.g. buying a house, paying for college, etc.

Nobody is buying a CD to get rich. Now that we've gotten the purpose of CD investing out of the way, let's discuss some logical reinvestment ideas for your CD proceeds.

Rates got super low once the Fed started cutting rates to combat the coronavirus. However, the 2022 Fed rake hikes brought back higher interest rates and CDs are attractive again. Therefore, it's good to think about CDs and other risk-free or low-risk investments now and into the future.

Here are some reinvestment ideas from an expiring CD.

1) Online savings account / money market fund

Online banks provide higher rates than banks that have a massive bricks and mortars presence due to lower overhead costs. There's always some reputable bank out there that's looking to build up its deposits by providing higher rates.

Below is a chart of the latest US Fed Funds rate progression. Given the Fed Funds rate is on the shortest part of the duration curve, your online savings rate should mirror the Fed Funds rate.

Alas, most banks will delay raising their savings rate so they can earn a higher profit off of their customers. The analogy is akin to a rise in oil prices. Gas stations will raise prices in lock step with a rise in oil prices, but will be much slower in lowering gas prices when oil prices fall.

Reinvestment Ideas From An Expiring CD - Fed Funds Rate

Everybody should also consider just keeping their money in a money market fund. With inflation elevated, money market funds are paying ~5%.

2) Highly rated municipal bonds.

Despite multiple financial crises since 1970, municipal bonds rated A or higher have roughly a 0% – 0.1% default rate. With no federal and state taxes to pay on the coupon, municipal bonds are more attractive to income earners in the highest income tax brackets. You can buy a muni bond ETFs like MUB and VTEB.

Municipal Bond Default Rates By Grade

3) US Treasury Bonds.

Given the dollar is the world's currency and the US treasury can alway print more money to pay off debt, US Treasury bonds are considered risk-free. If you hold a 10-year Treasury bond for 10 years, you will get your annual coupon and full principal back.

Below is the historical chart of the 10-year Treasury bond yield. If you buy a 10-year treasury bond today, you will get a ~5+% annual coupon. You can buy Treasury bond ETFs like IEF and TLT.

Interest earned on all U.S. Treasury securities, including treasury bills, is exempt from taxation at the state and local level but is fully taxable at the federal level.

If you're unfamiliar with this asset class, please read How To Buy Treasury Bonds And Buying Strategies To Consider.

Reinvestment Ideas From An Expiring CD - 10-year treasury bond

4) Invest in another CD.

If you don't indicate you want your CD proceeds to be deposited to another account, the bank will give you a grace period and automatically re-enroll you in the same duration CD at whatever rate they are currently offering. Beware that this is generally a poor choice as the terms are sometimes less favorable.

For example, when I locked in a CD at 3%, USAA was offering the highest rate. I banked with them in the past because I've been using them for insurance since 1994 when I first got my driver's license. When it came time for that CD to renew, their 1-year CD rate was only 0.71%, their 5-year CD rate was only 2.13%, and their 7-year CD rate was only 2.17% despite rates having moved back up to where they were.

The pandemic made CD interest rates so low, I stopped investing in them and looked at better CD investment alternatives. But since the Fed started raising rates in 2022, CDs are attractive again.

My favorite bank today for the best CD rates is CIT-Bank. They also offer the best high-yield savings accounts.

5) A business arbitrage.

Whenever you find an opportunity to spend a dollar and get more than a dollar in return, you should spend until the marginal revenue equals the marginal cost. The most common business arbitrage is hiring an employee for X and having the employee produce X+. No employee would continue to have a job if s/he didn't produce more than they cost.

Another common business arbitrage is advertising online. Due to sophisticated data analytics, it's very easy to see what type of return you can get from an advertising campaign, especially on fake news platform, Facebook.

Related: The 10 Best Reasons To Start An Online Business

6) Invest In Yourself.

Given your investments should largely be a pleasant tailwind for your path to financial freedom, the biggest investment you can make is in yourself. Your main source of income is likely from your job or business. Therefore, it behooves you to invest in yourself to become a better employee or entrepreneur.

The best investment someone can make in themselves is to learn how to be a better communicator. Once you become an expert speaker, writer, and presenter, opportunities start flooding in. Intelligence is highly overrated.

Learn how to make people feel like they are the only one you are talking to. Learn how to capture the imagination of your listeners. Make people feel like there's a deep connection so they become your or your product's greatest advocates.

Everybody should plant their flag online and build their brand as well. Don't let other internet companies get rich off you. Get rich off yourself.

You can also buy my bestselling books, How To Engineer Your Layoff to learn how to negotiate a severance, and Buy This, Not That, to build more wealth.

7) Pay down debt. 

No matter how low the interest rate, I've never regretted paying down debt and neither will you. For example, it feels absolutely wonderful to no longer owe the bank $815,000 after I sold my rental house in 2017 despite the mortgage rate only being 2.625%.  When I paid off my MBA loans, I felt like a weight was lifted off my young shoulders.

Here's my FS-DAIR framework if you're wondering how much of your free cash flow you should use to pay down debt and invest. Any interest rate at 10% or higher is highway robbery and should be paid down with great focus.

Pay Down Debt Or Invest Framework - FS-DAIR, reinvestment ideas for an expiring CD

Out of all the reinvestment ideas for an expiring CD, paying down debt may provide the most peace of mind. Your debt interest rate is likely higher than your CD interest rate. And you increase the strength of your balance sheet by paying down debt.

8) Invest in real estate

Real estate is my favorite asset class because it is a tangible asset that is less volatile, provides utility, and generates income.

Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity. 

Take a look at my two favorite real estate crowdfunding platforms that are free to sign up and explore:

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and now manages over $3.5 billion for over 500,000 investors. The money manager focuses on residential properties in the Sunbelt region, where valuations are lower and yields are higher.

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.

I've personally invested $954,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$380,000.

Both platforms are sponsors and Financial Samurai is an investor in Fundrise.

Invest In Private Growth Companies

With 10% of your capital, consider investing in private growth companies through a venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

One of the most interesting funds I'm allocating new capital toward is the Innovation Fund. The Innovation fund invests in:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

Stay Conservative Most Of The time

For a long time, I wondered how I'd reinvest my CDs once they started coming due since interest rates had fallen drastically over time. Sometimes, you can afford to take more risk if the conservative alternatives are not attractive.

In early 2014, my $400,000 4.1% CD expired and interest rates were still low back then. Hence, I decided to take more risk by investing $250,000 of the proceeds in a fixer that was asking $1,250,000. Taking on leverage to buy a single concentrated asset is certainly not a low risk endeavor.

However, I felt strongly that panoramic ocean view homes in San Francisco would rapidly rise in value. Besides, I had two other CDs in the wings, including one that just expired to bail me out just in case things went south.

During the pandemic I became much more interested in investing in rental properties to ride the inflation wave higher. When you can earn higher rents and enjoy capital appreciation, you are double winning. The stock market was too expensive and volatile for my liking.

Now that CD rates and Treasuries are attractive again, I'm back to diversifying. The stock market could be ugly this year and I'm in favor of preserving capital. Also see my article 2023 Housing Price Forecasts: More Bears Than Bulls.

Related Post: Ranking The Best Passive Income Streams

Stay On Top Of Your Money 

Sign up for Empower, the web’s #1 free wealth management tool to get a better handle on your finances. Run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms.

The better you can stay on top of your finances, the better you can optimize your finances. Now that you know all the reinvestment ideas for an expiring CD, your net worth will likely become more complicated.

Empower Retirement Planner Tool

Related post: How Much Savings Should I Have Accumulated By Age?

For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. I help people get rich and live the lifestyles they want. Reinvestment Ideas for An Expiring CD is a FS original post.

36 thoughts on “Reinvestment Ideas From An Expiring CD: Stay Mostly Conservative”

  1. I was just shuffling some money to patch my own asset allocation this week. I also needed to get a 529 going.

    I like the muni bond / debt pay down strategy. I haven’t looked closely at inflation protected treasuries in a long time, but your article made me curious. Anyone have a quick take?

  2. Great run-down on CD’s. I have had a couple of CD’s over time and am about to setup a CD ladder. I work in the finance industry and we see a lot of high net-worth people use this method.

  3. Mr. Rational Buck

    I really like the idea of setting up a CD ladder and would like to look into it more. I’ve seen the idea on this site and a few others and should probably set aside a small amount of money to start one.

    Also, I was a bit surprised at your idea of paying down even low-interest debt (i.e. student loans, vehicle loan etc.). I suppose, like you noted, there’s something to the idea of having the weight lifted off my shoulders! A little extra monthly cash flow would be nice too ;).

    Great post, as usual!

  4. Samurai –

    To stay liquid and to have risk-free returns – the CIT MMAccount isn’t a bad option; unless there’s a true CD rate that is 50 basis points higher on a one-year. THe 11 month CD of 1.85% is nice, with no penalty withdrawals, however. I like that plan mostly – liquid, easily accessible and movable for other investments. Great place to park the cash. Further, though it’s interest income, with “lower” brackets, shouldn’t be too much tax to pay on that interest.

    -Lanny

    1. Yes the Syn Bank 2.35% CD is definitely a good one, I opened one the other day. Also at Ally Bank you can do a 9 month CD at 2% (with minimum deposit). These shorter terms CD’s are the way to go so you can keep up fairly well with rising interest rates and not be locked in at a lower rate for too long. Also, note the CIT 1.85% No Penalty CD is a good one however know that their delayed processing time means that it will take a while to simply open or close CD’s.

  5. Paying down debt is a great default option. I like keeping any extra cash against the mortgage balance, with the potential to be re-drawn if and when needed – or if an opportunity too good to turn down arises. Never really been all that comfortable with locking the funds away in a term deposit where you can’t access them readily.

  6. You’ve mentioned buying individual muni bonds in multiple posts. Any recommendations on AA or better bonds or a good resource for selecting? I live in FL so won’t get any state tax benefit, but the fed tax spread vs treasuries and CDs looks very attractive right now.

    Also, how long are you going with your munis in this environment? Another benefit of munis is that they tend to hold up better than Treasuries when rates rise.

  7. One nice thing that treasuries over CD’s is they are exempt from state income tax. Depends what state and what bracket you are in, but it can make a real difference in after tax yield.

  8. I own no CDs and no bonds. You have to pay tax on the interest for one thing. Dividends get better tax treatment and pay at least as much.

    My view: The time to buy CDs and bonds is when interest rates are high and going down and inflation is low. The time to borrow is when interest rates are low. Borrowing also protects you from inflation. If there is high inflation, you will not owe any more money or have to pay higher interest as it is a contract rate. I have the equivalent of safety in rental and pension income and a lot of real estate equity. I am use my line of credit to smooth cash flow rather than pulling out money from stocks as the cost is so low.

    It is much more complex to invest in bonds than it is in stocks, as there are many more factors, including global money flows. I also view bonds as riskier than stocks because unlike the stock market that more or less always goes up over the long term, bonds go up and down, and tend to go down when stocks go down (they are not inversely correlated). Anyway, I got tired of losing capital on bonds, and decided to get out of balanced funds and bonds years ago. After that I did go back in when rates were going down, bought a bunch of corporate bonds, with long maturities, yield over 6% and made a nice gain as rates went down. I sold them for 10% more than the face amount, so I had 6.6% in interest per year plus a 10% bonus. But then went fully into the stock market. I am an amateur so I don’t know if what I did was right or smart, but it worked for me. My financial advisor at the time was not happy with me and that was about the time I moved to a discount self-service broker and actually started making money.

  9. MICHAEL SEDLER

    Everbank has a 12m cd at 2.2% with a low 5k minimum. I built a quarterly ladder there starting at just 1.45 July of last year. So you can see they are raising rates fairly quickly.

  10. Great post. I recently purchased 5 yr CDs for 2.7%. Interesting I went to my bank, Citibank and asked what their 5 year CD rates were, and it was less than 1%, so I asked two questions, which they could not answer. Why would I keep any money in your bank? And how do you stay competitive? I just go to Vanguard and they search the best CD rates. Wells Fargo was paying 2.7 %. I found treasuries were not paying as high as CDs.

    I sometimes think I may be too conservative. The year I left my job in my late 40s was also the year I decided just to pay the remaining balance of my mortgage. Nice not to have a mortgage.

  11. I have found the tools on Ameritrade to be very helpful.

    The have a grid with various going rates for CDs/treasuries/corporates and municipals and by maturities.

  12. My wife and I got a bunch of the one-year 2% CDs that Ally was offering at the end of last year. We bought them with some of our emergency funds, so I’m not sure what we intend on doing with the money once those CDs mature. Most likely we’ll roll them into another CD, but that’s only if interest rates are favorable.

    And what’s up with banks that offer CDs with a lower interest rate than savings accounts that the very same bank offers? I know the CD rate is more guaranteed than the savings account rate, but it still makes no sense.

  13. “Better to miss a zillion opportunities than blow up once. I learned this at my first job, from the veteran traders at a New York bank that no longer exists. Most people don’t understand how to handle uncertainty. They shy away from small risks, and without realizing it, they embrace the big, big risk. Businessmen who are consistently successful have the exact opposite attitude: Make all the mistakes you want, just make sure you’re going to be there tomorrow.” – N.N. Taleb, ‘Skin In The Game’

    Sallie Mae Bank in Utah has 5-year FDIC insured CD at 3.2%.

    1. Another Reader

      For those of us in Blue Sky States, JP Morgan offers the same rate, at least on Fidelity. Remember, these rates are not compounded,and APY’s are needed for comparison.

  14. It seems to me that the headwind for riskier investments depends on the real risk free interest. By real I mean the risk free interest minus inflation. If bank accounts start yielding 5% but inflation climbs to 6% then they will be (or perhaps should be) just as unattractive as they have been in the last few years.

  15. Buy VRDOs. Tax exempt munis with 1 day or 1 week put back to high quality issuer or bank. Minimum 100k. Rates are mid 1% range.

  16. I have one last CD expiring in a few months. I remember thinking it would be forever until expiration when I first opened it but time has gone pretty fast. I was happy to have my CDs when I did as part of my investment portfolio. I plan to put the cash in the stock market and pay off some debt when it expires. This is a great list of choices I’ll reference then and I just might spread around the cash in more ways! Thanks!

  17. Allocating 50% to muni bonds sounds like a good idea. Most of our cash is at a local reward checking account. We get 1.58%. I put the rest in a money market account for now in case the stock market drops more.

  18. One idea for munies: I have traded the MUB etf for its Vanguard equivalent, VTEB, which has a more attractive expense ratio.

  19. Internet bank Popular Direct has online savings rate of 2% with a 5,000 minimum balance. Not bad at all.

  20. I just opened a 1-year CD at CapOne at 2.05% to arbitrage a 0% APR $0 fee credit card balance transfer that I generated from a cash shortage due to Christmas + IRA maxing.

    With my money market at 1.6% (you mentioned a better deal at 1.75%), it is almost better to leave it accessible…

  21. Charleston.C

    With savings rate at 1.75% APY and rising, can owning short term CDs be justified? Except for the promotional rates for 11 month CD, just about all other CDs at CIT Bank are below the their own savings account APY. Almost feel as though one would be shooting themselves in the foot by locking in their money, and then shoot their other foot watching rate hikes that doesnt benefit the money they locked in.

  22. Hey Sam. Could you talk about how you actually purchase municipal bonds? I don’t know if you could fill a whole post about it, or just a comment here. But, I am interested in looking into them and not sure where to start.
    I’d like to know where to buy them, if you do it straight with the municipality, through a broker, as a basket of funds, etc.
    Thanks.

    1. Adam and Jane

      Mark,

      We have been buying individual (NO muni bond funds) NY Muni bonds since 2010 prepping for doomsday events such as layoffs. We hand pick all of our bonds and our 3.5% to 5.2% bond portfolio will generate Federal, State and City tax free income of 88K for 2018. We became FI in 2014 with this income and it eliminated our financial stress. We also have over 8 years of living expenses in regular savings earning nothing but this provides security in case we happen to lose all of our muni bonds. The default rate for A bonds are so low that we sleep very well at nights. We also have NO money in the stock market.

      After several years of buying bonds via banks, we learned that banks charge at least 1.25% to 2% more per muni bond compared to self service brokerage like Fidelity. For example, a muni bond at Fildelity may cost $100 PAR but it would be $102 at a bank. We no long buy bonds via a bank or broker. We NOW only buy our munis in Fidelity and will transfer the money from the banks when the bonds there are called or matures back to Fidelity.

      Sam wrote a great post on zero coupon muni bonds which pays interest and principle when a bond matures. This would be great if you don’t need yearly income and are saving for a future event.


      https://www.financialsamurai.com/the-allure-of-zero-coupon-municipal-bonds/

      My Muni bonds criterias
      1. Ratings is extremely important. I tend to avoid investment grade which is a B. I look for bonds that are rated a min of upper med grade (single A).
      Best quality – AAA
      High Quality – AA
      Upper Med Grade – A
      See this site for the ratings chart – http://www.munibondadvisor.com/rating.htm

      2. Buy what you know.
      I like MTA (mass transit), water, Dorm Authorities for schools and hospitals. Make sure the school and hospitals are well know. People will always need these facilities. Bonds will vary from state to state so buy what you know in your state.

      3. I mainly buy Revenue Bonds. I avoid GO (General Obligation) bonds. With revenue bonds, municipalities can increase revenues to pay back bond holders.
      I started out buying GO bonds because they were backed by taxes. Many thought that GO bonds were safe too until issues in Detriot and Puerto Rico. As a result, I now buy REV bonds. To be on the safe side, one can buy a mixture of GO and REV bonds but it comes down to financial stability of your state.

      4. Tax exemption. Make sure it is totally tax free. Check the bond details.
      Federally taxable – NO
      Subject to AMT – NO

      5. Insured
      If a muni bond is insured then the bond is safer. Insured bond are tough to find and they are usually a bit more expensive.

      6. YTW (Yield To Worst or Yield To Call) greater than 3.75%. In a 33% tax bracket, it is like a 5.7% CD.
      YTW is the min the bond will earn when a bond is called. Most bonds are callable after 10 years of being issued so I dont really pay attention to maturity date. Bond prices are currently dropping so I like to buy bonds in x amounts. Dont spend all your money on just one bond. Currently, I can buy a 3.85% NY Muni bond at PAR ($100). I check Fidelity almost every day for muni bonds for my State for any good buys. In the end, just be happy with the yield and dont go crazy if the bond price drops. If you hold the bond until it is called or matures then you will get the face value back to avoid lost of principle except for the premium paid.
      I like to sort all the munis for my state with YTW in descending order which will display the highest yield at the top of the list. This makes it easier to select a bond.

      7. Call dates, mature dates and month interest is paid.
      You can buy bonds with different call dates and maturity dates to create a bond ladder. This way your bonds will return your principle at different years so that all of your money is not locked to a specifc year.
      I also look for bonds to pay on different months of the year so that I will get bond payment every month. This is not a show stopper but it is nice to get payments every month.

      8. Price of the bond.
      Try to buy bonds at face value of $100 (PAR) or less. If you have to pay a premium then pay at most 1-2 dollars. For example, a 4% bond at $102 will take 6 months to break even. When this bond is called or matures, only the face value is returned to you. If you paid a premium then it will result in a lost of principle. This is not a big deal if especially you are happy with the yield and the interest you received.

      Adam

      1. Great summary Adam. Interesting point on Revenue bonds. Most of the advice you’ll hear from advisors is to stick with GO since they are backed by taxes. Yes, there are risks like PR and Detroit, but these are very rare. No bad experiences with Revenue bonds in your portfolio since 2010?

        Just moved to FL where there is no state tax…which is great…but you lose the state benefit of munis. Munis though still look attractive if your in the high fed income tax brackets. Problem is that it’s Hard to “know your area” if you have to buy out of state bonds. What would you recommend for someone in FL?

        Thanks!!

        1. Adam and Jane

          TD,

          I have no issues with any of my REV bonds since 2010. I mainly buy NY MTA (Mass Transit), water, schools, hospital and multi-family housing. People will always need these services. I was going to buy 155K of 4% NY ST TWY AUYTHGEN GO (bridges)recently for around PAR but it increased in price the next day so I missed it. It is currently at $101.8. I like to pay $100.5 or under.

          You said “Just moved to FL where there is no state tax…which is great…but you lose the state benefit of munis. “

          That is a great benefit of living in a tax free state like Florida. You can buy munis from any State and it will be tax free. My co-worker lived in Long Island, NY and moved to Florida when he retired recently. I helped him create a NY muni bond portfolio a couple of years before he retired. He is living off his NY muni bond income and he happily pays no State taxes on them. He has not looked into buying any FL muni bonds yet.

          Since you live Florida now, you can ask you neighbors and friends if they bought any FL munis. It is great that you are able to buy from any state! If you are unfamilar with FL then you need to research your State to see if it is financially strong. Read about your schools and hospital and how they rank. That is why the rating of the bonds are so important. If you are new and afraid then stick with the higher AA-AAA rated and/or insured bonds to start.

          I am not a financial advisor but you can buy NY muni bonds similar to what I bought. I have friends in NJ and I recommended Transit and schools too. Many of the NJ bonds are BBB and little are A* rated but my co-worker bought the BBB rated ones and is happy to get tax free passive income.

          Personally, I only buy individual muni bonds so that get back the face value of $100 when a bond is called or when it matures. I won’t lose my principle. Just don’t get freaked out when the prices goes up and down. In fact, I like it when the price drops because that is when I go shopping. I was watching the bonds prices dropping recently and the next day it jumped back up .5% so I missed my opportunity to get that NY bridge GO bond. I am a frugal muni bond shopper!

          Ask Sam since he buys CA muni bonds and Joe at RETIREDBY40 about his Oregan bonds.

          You wrote “Munis though still look attractive if your in the high fed income tax brackets.”

          Very true since we were paying the AMT many years ago and tax free is always good. We are ultra financially conservative and we used to only get CDs. We love it when they were 5%. Even when I retire and our income tax bracket drops, we will still continue with munis. I am content getting a min of 3.5% yield to worst tax free.

          Adam

          1. Thanks for all the extra detail Adam. Really helpful for me and perhaps others on the blog who don’t have much experience with individual munis.

            I went on the Fidelity site and ran a national search per your criteria. Surprisingly, most are priced above par at the moment. There were certainly some below, just a lot fewer…so I guess I’ll need to research these more closely.

            Any specific NY issues you’d recommend? Much appreciated and will let you know how I do.

            1. Adam and Jane

              TD,
              You are welcome. Muni bond prices goes up and down and for the pass 2 weeks or so it was dropping but it started to rise again.

              For my first 65K in Fidelity, I passed bonds that were a decent price. I was hoping for the price to drop more but then the price started to increase. As a result, my 65K lost opportunity and it sat there for 6 months without bond interest before I purchase the similar bond at a higher price. Lesson learned, dont wait too long if you are happy with the yield and price.

              Also when I started in 2010, I purchased many 5% bonds for $106 to $108. For 100K of bonds that would cost $108K. That bond was called and I got back $100K but overall I earned YTW 3.5% which is better than to let the money sit in a bank CD for less than 1%. I learned that instead of looking for a higher coupon rate, look at the YTW. Why “lose” principle when you can get the same 3.5% with a 3.5% bond around PAR? Since my “Financial Advisor” did not educate me, I learned the hard way. In the end, it is the same math because my money would have earned 3.5%. It is just a mental thing to get back $100K when you paid $108K.

              I would be interested in the following if money was burning a hole in my pocket. These are within my max price of $102 and YTW is > 3.5%

              1. 64987DGY4 NEW YORK ST HSG FIN AGY REV AFFORDABLE 3.95% YTW is 3.90 for $100.375

              2. 64990CJC6 NEW YORK ST DORM AUTH REVS NON ST 4.00% YTW is 3.75% for 101.827

              3. 650010BC4 NEW YORK ST TWY AUTHGEN REV JR INDBT 4.00% YTW is 3.722 for $101.831

              4. 64972GPY4 NEW YORK N Y CITY MUN WTR FIN AUTH WTR 3.625% YTW is 3.694% for $98.750

              Just to let you know that Fidelity charges 0.10 % and adds that to the price and the yields will be slightly less that what is quoted in the listings.

              Save the search listings in a browser for quick checks on the Fidelity site instead of manually creating the search each time.

              Adam

              1. Adam and Jane,

                If you are still reading this blog, how were your muni’s doing for the next 13 years? Thanks.

  23. Last year I cashed out a bunch of US Treasury Bonds that my grandmother bought me when I was a kid. Wow! Back in the early 1980’s they earned up to 14%!!

    But now, not so much. I think either a long term CD or Treasury Bonds are the way to go for solid, bomb-proof conservative investments. I’ve been meaning to do it for a while so this post is timely. I’m leaning towards CD’s

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