Quote:
Originally Posted by kork13
I really appreciate the comments already, they're all excellent.
That makes alot of sense, I like that idea alot... I don't think it's realistic in this particular case to do a true ladder -- it would take me 7 years to set it up, or require 7 CD's of different terms/lower rates, which sort of defeats the objective. However, to gain a similar effect, perhaps I could do it in 8 $2000 CDs, just separating them by 1-2 months. It would still take a while to set up, but not so long. That way I would have the option of how much to tap at a time. Plus, that makes it alot easier to add additional CDs later on if/when I need to expand my EF.
Noted. I'm thinking that it would only be beneficial to close/re-open (essentially reset) the CDs in order to gain at least an additional 1%, with a break-even point at about 1 year. Definitely a significant consideration.
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Try this for a CD ladder:
Open 1 7 yr CD with 2k at 7% interest
open 6 other 2k CDs, maturing at 1-2-3-4-5-6 year intervals
when each CD matures, roll it into a new 7 year CD.
If you put all 15k into a single CD, you have too much interest rate risk. 7% looks good now, but in 4 years, what will it look like?
OR
open 7 different 2k 7 year CDs now- so if you have a 2k emergency, you don't pay a 15k interest penalty on the whole CD when you only needed 1/7 of the money.