Top 5 Long-term CDs with decent Early Withdrawal Penalties

March 1st, 2016

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Before the nitty-gritties, our focus is institutional investors such as banks and credit unions. We don’t give out the names of the banks and/or credit unions on our site, as that is how we make our income. We aim to serve and help investors manage their CD portfolios. We only work with FDIC insured banks and NCUA insured credit unions.

Rates are quoted net of our fees. So if you find any of these rates attractive, the indicated rate is what you can expect to earn. There is no smoke and mirrors here. Our usual fee is 10 Basis points or 0.10%. That comes to $100 per $100,000 invested, per year of the CD.

Top 5 long-term CD options for credit unions and banks*:

  1. 5-year – 2.17% — 4-month Early Withdrawal Penalty (Credit Union only).
  2. 5-year – 2.05% — 6-month Early Withdrawal Penalty.
  3. 5-year – 1.60% — 3-month Early Withdrawal Penalty.
  4. 5-year – 2.10% — 9-month Early Withdrawal Penalty.
  5. 5-year – 1.65% — 6-month Early Withdrawal Penalty.
  6. 5-year – 2.15% — 12-month Early Withdrawal Penalty.

Top 5 long-term CD options for corporations*:

  1. 5-year – 2.05% — 6-month Early Withdrawal Penalty.
  2. 5-year – 1.80% — 6-month Early Withdrawal Penalty.
  3. 5-year – 2.15% — 12-month Early Withdrawal Penalty.
  4. 5-year – 2.10% — 9-month Early Withdrawal Penalty.
  5. 10-year – 2.55% — 18-month Early Withdrawal Penalty.

We like this strategy to CD investing because it gives you a bump in current income over shorter-term options and the penalty can provide a hedge against rising rates. In our 25-years of business we have only had two occasions where banks wouldn’t initially honor the EWP. One of the banks ended up negotiating a higher penalty and the other honored the original penalty after evidentiary documentation was provided.

As an example, if you did take $1,250,000 and invest in the CDs above your income after two years would be about $47,750. If you instead invested in the top 2-year rates, your income would be $31,450. Your income is 51% higher with the 5-year CDs. If rates increased after two years and it made sense to close them your net income after penalties would be about $32,838. That figure is larger than if you had just invested in the 2-year CDs. In order for the 2-year strategy to yield better results you have to believe that in two years, you will be able to earn greater than 2.55% for a 2-year term. So ask yourself, “Do you feel lucky? Well do ya!” [Spoken in my best Dirty Harry voice]

Please complete our contact form if you want more information.

By the way, a few years back we did publish a case study on investing in 5-year CDs vs 1-year CDs.

*The top option isn’t necessarily the top rate, but the best rate/penalty combo that provides the highest 2-year equivalent yield.

Image: FreeDigitalPhotos.net

-- By +Chris Duncan

One Response to “Top 5 Long-term CDs with decent Early Withdrawal Penalties”

  1. Mustard Seed Money Says:

    I will have to take a look at these closer. I haven’t allocated any CDs to my portfolio but I think from an asset allocation that this is probably a smart move. Thanks for sharing!!!
    Mustard Seed Money recently posted..Are Messy People Better With Money?My Profile

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