The way I do this is to compare $5000 [at] 4.25% and $4947 [at] 5%. And see
how long it takes for the 5% to beat the 4.25%. In this case, it will
be 2 years.

"anoop" <ghanwani[at]gmail.com> writes:

- quote -

Yes -- CD early withdrawal penalties are an above-the-line
adjustment to income.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

As long as starting today, Sept. 29, each CD has five years until it
matures, and all other things are equal (like the 5% CD has a penalty that
is acceptable), nothing is wrong with your argument.

Not sure exactly what you're up to, but you might want to consider some kind
of laddering, as well. That could prove even more lucrative, particularly if
interest rates continue to rise for a while.

I don't know why you would want to lock up your money for 5 years if we
are in an environment of rising rates. Emigrantdirect.com has a savings
account for 4%. A year from now, rates might be close to 5%. I would
only consider short term CD's like 6 months or a year. In fact there
are many banks that are offering a 1 year CD for 4.25%, so that 5 year
CD you are considering does not sound that good a deal.

Tommy Taylor wrote:
- quote -

- Is the $53 early withdrawal penalty tax deductible?
- When does the 4.00% CD mature? If it matures in 4 years
from now, you will earn something for the remaining 1 year
which hasn't been accounted for.

Anoop

Let's say that I've got a $5000 CD at a credit union for 5 years at an
interest rate of 4.25% with an early withdrawal penalty of 90 days interest.
5 year CDs are now offered at 5%. What's wrong with cashing the 4.25% CD
and moving the money to a 5% CD? The 4.25 % CD will yield $1063 over 5
years; the 5% CD will yield $1250 over 5 years. The penalty for early
withdrawal would be $53. It appears as if the gain would be $134 after the
penalty...over 5 years.

Tommy