Guaranteed 4% - 4.7% T Bills vs Brokered CDs?! Which Is Better? BUYER BEWARE!

[@DiamondNestEgg]

📢 We've launched! Get 15% off our brand-new bond courses thru 11:59PM ET on 4/30/2024 for Financial Literacy Month - enter coupon code bondfans2024 at checkout - see links below for more details! ⭐ Bond Beginners (our foundational-level bond course): www.diamondnestegg.com/bond-beginners ⭐ Bond Masters (our intermediate-level bond course): www.diamondnestegg.com/bond-masters ⭐ Or get both & save $100: www.diamondnestegg.com/home#_paa2isucf ⭐ Join our super-supersaver membership for regular market updates & monthly live member Q&As 👉 kzbin.info/door/nexoc6tvesvcCEzZhmI-Agjoin HAPPY THANKSGIVING! Thanks for visiting our personal finance channel! We hope this free content will help fast-track your financial journey! Everyone's financial journey is different. Please note that there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances.

[@kennethlombardi3003]

Yes, show us how to buy brokered CD’s at Fidelity!

[@ParisianThinker]

at Vanguard too!

[@emc6511]

2008 crash had 3 CDs (5.5% - 5.75%) in 3 different banks that failed. There was no drama or delay. FDIC announced failures every Friday. When failed bank opened on Monday, they were present. If account under $250K coverage, go to the counter. If over, go to the "tears and fears" room. At the counter, each of 3 banks a different method. One simply already had prepared a check to me in the full amount of the account balance previous Friday. Another simply provided the FDIC document that the account was now at ABC bank, same CD, same terms. And the last one simply provided the FDIC document that the account was now at XYZ bank, same CD, but years until maturity reduced from 4 to 2 years. Those of us under the $250K enjoyed the coffee and goodies while waiting our turn. The over $250K ... tissues. Yes, full grown men and women crying ... because end of the day they knew better, but didn't bother to heed the limit.

[@steve6969-v8t]

Great insight on how the FDIC process works with a failed bank. Thank you for sharing.

[@DiamondNestEgg]

Thanks for sharing your experience with us!

[@CostaMesaPhotography]

What an excellent video! Your explanations are organized, concise, and easily understandable. No jargon, no fast-talking, but plain language that follows the logical progression of your topic. You are an excellent presenter, and your knowledge was very informative. I'm definitely subscribing to your channel!!

[@blue-fj9ky]

She's a super clear communicator.

[@alphamale2363]

I bought brokered CD'S on Fidelity and did not find it complicated at all. I think the T-Bill auction process is complicated: announcement date, auction date, settlement date, rates established upon auction. CDs are always available and the rate you will get is crystal clear. It is clearly stated whether they are callable. Anyway, love your channel.

[@DiamondNestEgg]

Thanks for the insights!

[@mariceldb2990]

Detailed explanation of buying brokered cds was a great time spent. Thanks for the warning of failed banks.

[@supersteve8305]

My parents had deposits at a savings and loan that collapsed in the early 80s in Ohio. I still remember how tight money was in the household until they finally got their money back. I currently have five brokerage CD'S at different banks. All the money is in an IRA, so taxes are equal. The total is less than the $250,00 FDIC coverage. But I never forgot that apparently. Great coverage of the differences. I'm going to get my first T-bill next week, thanks to your videos.

[@ruthlessluder]

I bought my first 13-week t-bill today with an effective rate of 5%. Thanks for the video.

[@morrylauder7534]

Thanks for the lessons! I just bought brokered CDs for my Fidelity taxable account. I live on Guam which has no state or local taxes. It was a little confusing at first, kept going to CD ladders, but next time will be easy, especially after selecting the period (length) you're interested in. I chose a 3 month, 4.75% yield from Fifth Third Bank, no automatic roll over. You really helped me learn some of the lingo.

[@DiamondNestEgg]

Glad you enjoyed the video!

[@darrellcook4290]

Nice video. One strategy I've employed over the years is to buy multiple CD'S at one time from the same bank. For example if you have $10,000 to invest in CD'S buy 10 $1,000 CD's. Then if you NEED the money for un expected expenses or emergencies you only have to cash in what you need not the entire $10,000. This works out very well espically if the current rate is below the rate of the CD you have to cash in.

[@emc6511]

Exception is when "only one CD allowed" for their promotional special. I've had that at a couple of credit unions. Would not allow more than one CD that was at a promotional higher rate plus "add on" feature, for example. But under normal circumstances; yes; break them up to manage EWP. I also do that for MYGAs.

[@bertdom5707]

And many are $10K minimum, with $1000 cd paying much less. If you have $100K to invest, another story….

[@salamanders6969]

Why not buy CD ladders?

[@macaccount4315]

I had a few CDs with failed banks in the Great Recession. The fdic made us super easy to get my money. I always stayed in insured limits. Also I got paid accrued interest. So have no fear, it works out just fine.

[@DiamondNestEgg]

Thanks for sharing

[@Low__expectations]

I think I watched all the T-Bill videos and learned as much or more as the excellent I-bond videos that hooked me to Jennifer's channel. What I think is particularly good is the listing out of her priorities and being clear, sometimes with examples, that other people's priorities can be different/just as correct for very good reasons.

[@Gr8thxAlot]

Great video! You predicted bank failures three months before they started. 👍

[@Jnglfvr]

Instead of recalculating the net yield of every bank CD offering simply calculate, once and for all, the equivalent brokered CD rate that would equal the same after tax income. E.g., let IB be the brokered CD rate and IT be the treasury rate (in either decimal or percent format so long as you're consistent). Let F and S be your federal and state tax brackets respectively in decimal format. Then a brokered CD would have to yield at least IB = IT*(1 - F)/(1 - F - S) to equal the net treasury yield. E.g, say you federal tax bracket is 24% and state tax bracket is 5% and the treasury yield is 4.5% . A state taxable brokered CD would have to yield 4.5*(1 - 0.24)/(1 - 0.24 - 0.05) = 4.82% in order to be equivalent after (tax wise) to a treasury. This formula could also be reversed and used to determine the equivalent treasury yield given a brokered CD rate viz IT = IB*(1 - F - S)/(1 - F).

[@allencole6568]

Thank you for this!

[@LifeBeautifulMess]

I never even considered a brokered cd until now. Great content as usual! I love your channel.

[@udaymadanu]

Please make the Brokered CD video. AND, thank you for all your wonderful videos and shorts!

[@xclntgig]

Great explanation of t-bills vs brokered CDs. This is all I needed to see to subscribe!

[@Redneck_Ed]

Great comparison video. Your point at 13:51 is the big one imo and the reason I favor brokered CDs. For me, the comparison (and even in your example at 7:29) are close enough to almost always favor CDs for the the certainty of knowing the exact brokered CD rate at the time of purchase. The big brokerage firms also will typically have offerings from the big national banks, so you can pretty easily find the ones that are most likely to be stable.

[@DiamondNestEgg]

Thanks for sharing!

[@rhandy901]

Thank you for this information! I did not know what a brokered cd was until I just watched this video. This is great information, I will look at this as an option now when comparing bank CDs. I would love to see a video of you purchasing a brokered cd in a Schwab account. I’m thankful for your videos and educational content. 🙌

[@WallaceBMcClure]

Here I am at the gym working out and boom, Jennifer is putting out informative videos on thanksgiving. I have to do some work later today as well, so I know this feeling.

[@DiamondNestEgg]

No work later for me (for once) - just insane amounts of cooking. Enjoy your workout!

[@WallaceBMcClure]

@@DiamondNestEgg I worked and ate Thursday and worked all day on Friday. You had it much easier than I. I took the weekend off.

[@alseidel5622]

One additional point, if your account is in a managed account it is also subject to management fees as well.

[@DiamondNestEgg]

Thanks for this

[@msdinba]

YES, I would definitely want a video on brokered CDs. Please do one. I’d hood to maturity and even considering long term.

[@danmarkiewicz3697]

Nicely done Jennifer, especially your summary/closing comments were a great reminder of how fragile the banking system is and at least one reason why some banks offer higher CD rates than other. As you say, BUYER BEWARE!

[@debrabullion3766]

Yes! This was such a helpful talk. Learned a lot!

[@syncm53]

I don't think you need to worry about bank failures at all with CDs. In the 2008/2009. I probably had CDs in five banks that failed it was absolutely no big deal it was a CD I wasn't going to pull the money out anyway I would get a letter at some point saying who would taking it over and I'd write down the name of the new bank. By going with all those in trouble Banks I got much higher rates. I think the only reason to worry that a bank might fail is if you have more than 250,000 in it or if it's a checking account or something your operating out of

[@DiamondNestEgg]

Thanks for sharing your experience

[@elidauz1177]

This video and as well as other Diamond Nest Egg super savers videos, for a 70 year old man, are truly an eye opener. I am considering moving most of my stock investments into safe and fixed income investments then came across your program - I'm glad I did. Simple, straight forward, great examples with tables and easy to navigate. Appreciate if you can have another session on how to buy Brokered CD (Fidelity and Charles Schwab). Thank you and Happy Thanksgiving!

[@bstephenson5684]

yes, I'd like a Fidelity video on Brokered CD's also! Thanks

[@aurianfaridi4207]

In a rising rate environment you will probably have to sell at a discount on the CD. If rates go lower than your coupon generally you can probably sell at a premium or with little loss.

[@esthercontreras3413]

Yes please make a video on how to but brokered cds. I want to know the tips and tricks

[@hh0676]

Just starting watching ur channel as was looking at both Auction and Secondary markets on T-Bills, glad u confirm better than CDs esp in current climate. U nailed bank failure mess months ago way before the Fed!!!

[@rightangletriangle3188]

I build a CD/T-bill ladder so that there is a fixed amount due each month throughout the year. Use T-bill as the core holdings and CD as the fillers for the ladder.

[@DiamondNestEgg]

Thanks for sharing

[@AK-qo6tx]

should we also pay attention to the settlement dates of the brokered CD? Some of the brokered CD do not settle for a week or longer from the date of purchase.

[@rekhadedhia9802]

I have same question?

[@ATHJD07]

Best video ever! Many many thanks Jennifer. Learning to think through how things work and use it to help inform my decisions is helping me save more for my short term and long term goals! My most important take homes are: Never buy T bills in my traditional IRA and stick with new issue CDs if I buy from a brokerage rather than a bank. The list of everything else I learned is too long for here but of great value in my siutation.

[@DiamondNestEgg]

I actually buy in my traditional IRA (don't have a Roth) - like I said, everyone's financial journey is different :-) Glad you enjoyed this Anne!

[@vasanthakumarselvaraj6375]

Thank you. I am overwhelmed by the big list of CDs in Fidelity. Could you please make a video of how to choose CDs in Fidelity?

[@Steve-rc1ug]

With a bank CD, in a rising rate environment, you can always elect to cash it in, take the penalty, and reinvest in a newer higher paying CD. This is especially useful for a five year CD where you think rates have peaked, and you want to lock up that yield before the rates start to decline. Depending on the bank, the penalty is usually six mont(s interest. Ally Bank charges 150 days interest. If on the other hand you had bought a 5 year brokered CD, let’s say at 4% and rates go up to 6%, you are going to have to incur a significant loss of principal if you try to sell that CD before maturity. Something to think about. A brokered CD should be thought of as a short term bond with FDIC insurance. The insurance covers the risk of default by the issuing bank, but it doesn’t cover interest rate risk.

[@jorgevelasquez9955]

Jennifer, Fantastic as usual, living in California, paying state and local taxes are the key points for sticking with T Bills. Thanks for great video once again.

[@bridgetg1916]

Jennifer, you are the BEST!

[@mikes1966]

Morning All....Here is an idea....please correct me If I am wrong.... I live in Texas..NO state tax.. I bought into it over a week ago...... 6 months T-bill payed around 4.50% and 5 year Callable CD which reviews every 6 months payed 5.25%..... If interest drops, and banks calls it, you have received 6 months of high interest(.75%) more than T-bill and if rates goes up, you are going to still benefit of higher interest until rates drop,,, Whenever, that would be

[@tubocabron]

Brokered CD's at Vanguard also only pay simple interest not compounded interest like banks usually do, not sure about other brokers, great video.

[@ginacarolco1425]

Video on this pls

[@tracystjohn1957]

My brokered CD at Fidelity only pays simple interest

[@Oristep]

Absolutely excellent and simple to understand explanation in just 21 minutes of nearly all important basics. Perfect!

[@gloriawitek6401]

We are new to your community. Your explanations are excellent. We wish you continued success. Please consider making more financial videos. Any university would also want you on their staff.

[@davidv.2050]

Great video! I’ve watched similar videos on KZbin that try to steer you to purchase bank cd’s from private firms and not brokerages. Scary!😮

[@stevemaggs6781]

I'm retired, but have a decent adjusted gross income, after allowable deductions. Regarding the "fed" and "state" income tax rates, using my 2023 actual income tax forms, I calculated my actual Fed and State income tax rates and applied these to your calculation formulas. In my case, a 5.25% CD was just marginally better than a Treasury, but I primarily buy Treasuries from the secondary bond market for three reasons: 1) Typically, CDs are "callable", which Treasuries are not and 2) If needed, it is far easier and less costly to sell a Treasury that has not fully matured than a CD and 3) buying a Treasury from the secondary market allows me to know, prior to purchase, what the YTM will be.

[@aperson1181]

Good precautions. However, T bills are not exempt from dried-up liquidity in the market. Like during the 08-09 and the Covid pandemic, there was a period of time when the Treasury Market completely stalled. Meaning, if you wanted to sell earlier, you could not. Of course, if you hold to maturity, it is not an issue. Right now, though, there is information that we are at a higher likelihood of reduced treasury markets liquidity, but it is better than holding cash.

[@DiamondNestEgg]

Correct - I talk about Treasury market liquidity specifically in this video: kzbin.info/www/bejne/j6jPo2OAnrmNg80

[@barbaratheresa6483]

I love your channel very much. Great didactics, precise, concise, easy to understand, just thr right amount of information. Keep up the good work! You are helping a lot of folks in need of financial literay like me.

[@dougholiday7523]

How about a vid on a brokered CD ladder at Fidelity.

[@denisekay1783]

After a lot of searching I found a credit union in my state offering 11 month CD special at 4.84%. We have no state tax. The other option I was considering was 4.80 non callable Chase 12 month Cd through Fidelity.

[@DiamondNestEgg]

Thanks for sharing

[@utubedtt8849]

thanks. Very clear and easy to understand. Great presentation. No boring.

[@unknownt5391]

I live in CA so I buy T bills because of the tax benefits.

[@GiantBlue1963]

Totally agreed on the liquidity issues on brokered CDs. These are essentially cash investments where you trade a little liquidity for a little better yield. The liquidity of the T-Bill giving you the ability to cash out and keep most if not all of the accrued interest (in case of emergency) is worth more than a small increase in yield. Further, in this environment, where CDs seem to be the T-bill rate reduced a bit for the banks profit margin the choice is pretty clear. Thanks for making these videos. I'm not a novice and I find your clear, holistic approach quite informative. They give me greater clarity and confidence in my decision making.

[@DiamondNestEgg]

Glad you’re enjoying the videos & thanks for sharing!

[@norcalpacific]

But with t-bills I thought you cannot cash it out till the end of the maturity term right? Like if I purchase some directly from the treasury you have to wait at least 4 weeks if you buy a four week term?

[@lowridinpacker]

Excellent Video as always. Could you do a video about buying resale corporate bonds on the Vanguard platform and how to calculate the interest? Would love to see that!

[@philharmonic.2453]

All your videos are top tier content. Keep up the fantastic work.

[@xwileycoyotex]

Just came across your channel and have learned a ton after watching just a few of your videos. You cover so much in such a short time!

[@victorscharuda1150]

Great video , you nailed it,thank u!

[@theworkinginvestor]

Fantastic job breaking it down. Please do one on brokered CDs.

[@davidnoriega8723]

Hi, Jennifer: Excellent videos! You are very informative, clear, and didactic. My family will consider all your advice when buying either instrument. Thank you.

[@blue-fj9ky]

You're reading my mind! After redeeming my I-Bond I chose T.Bills in the form of the ETF BIL. But I looked hard at brokered CDs, and direct purchase T.Bills. I chose in favor of instant liquidity and ease of transactions. Suggestion for a future video: your thoughts on very short-term US Treasury ETFs, and very short-term commercial paper ETFs!

[@100perdido]

Another thing about brokered CDs is that anything longer than 1 year requires you to take periodic interest payments. The APY shown assumes that you can re-invest these payments at the same rate the CD pays which might not be possible if rates are falling.

[@lifeisshort99]

I bought 2 yr CD LADDER a month ago from fidelity into IRA and hope yield to go up after Powel announcement but didn't. Still bought more this week.

[@alexanderchu312]

Just subscribed. I was just thinking about getting either t bills or brokered cds. You really help explain the math. Your t bill videos are great too!

[@b.vonschnauser207]

All your videos, including this one, are concise and very well-explained. Great content. I appreciate you posting!

[@johnnygoodman8257]

You have a gift. Thanks for sharing it with us!

[@davidletz9123]

Great presentation Jennifer! FWIW, I have no interest in buying brokered or bank CDS.

[@DiamondNestEgg]

Thanks. We're not buying any brokered CDs for the time being neither, but it seems there's a lot of interest amongst some of our supersavers, so it's important that they truly understand the pros & cons.

[@anneshields8188]

Thanks!

[@DiamondNestEgg]

You're welcome Anne!

[@SteveWaage]

Great content. I really enjoy learning from you. Happy TG!

[@whitneywalsh9127]

This is a great video. I Have to watch again so the info sticks. Thank You!

[@capncrunch1249]

Thank you for this very helpful and informative video. I just watched it for the second time and the points about state income tax assessed on CD’s and on all assets in tax advantaged retirement accounts are useful in deciding whether to buy cd’s or t-bills. Your opinion on the safety of t-bills versus cd’s and the historical data you included were also greatly appreciated.

[@jimdixon6688]

Great Video. Have been buying CDs since they hit 5% on Fidelty. We go one maybe 3 month only.

[@DiamondNestEgg]

Thanks for sharing

[@danielmcgowan113]

Another highly informative video! It re-enforces my preference for T-Bills over CD's. Happy Thanksgiving to you and your family!

[@Carnerd101]

Thanks! I received a good chunk of change from my grandparent's estate and wanted to know how to get it to work for me while I wait for the housing market to (hopefully) settle down.

[@DiamondNestEgg]

Glad you enjoyed the video

[@dr.terrancemoore3755]

great presentation as always!!

[@AA-nh2ou]

Get well soon (from your cold)! I wait for your videos everyday. Gargling with salt in warm water is very beneficial.

[@goof260]

The last part here about bank failures as illustrated in your chart was surprising. Im glad you put that up. I wonder if the FDIC insures principle as well as interest. As far as buying brokered CDs on TDameritrade, the Bond Wizard function allows you to qualify your search so you don't have to scroll through a loooong list of CDs.

[@DiamondNestEgg]

Thanks for the info!

[@DiamondNestEgg]

And from what I understand, FDIC does insure principal + accrued interest up to the point of bank failure so long as the amount is under the $250K thresshold

[@eddenoy321]

@@DiamondNestEgg If I recall, you are correct about the FDIC insuring principle and interest. But they were strict about closing your accounts prior to their announcement of insolvency. If you did so , you were ok even if you were over the insured limit of 100k at the time. The FDIC and the press did give media coverage at least a week or two beforehand regarding weakness in banks holding tons of mortgage backed derivatives on bogus loans. The largest shaky banks were even named in the news as well. The only thing I lost was a huge amount of time on their hotline and about 2 months waiting for the checks to go out during which no interest was earned, but that was the least of my concerns. This was the IndyMac failure in S.California. I believe uninsured depositors who missed the surprise closure got 50% back quickly, then they parsed out more as the receivership was divvied up amongst amongst a slew of banks. The Obama administration raised the FDIC insurance to 250K a few months later. This was in contrast to the UK, where all savers were 100% reimbursed , even if they had uninsured deposits.

[@supersteve8305]

@@eddenoy321 The rate was raised from 100K to 250K on a temporary basis, to keep people from making a run on the banks and blowing up the entire banking system. It was later made permanent.

[@eddenoy321]

@@supersteve8305 Correct, Steve

[@bernicewahine9625]

I had Lehman brokered CDs when that firm was thrown under the bus. The FDIC payed off. It took a few weeks, I think there was no interest paid during that time.

[@DiamondNestEgg]

Thanks for sharing this with us - very interesting!

[@ralphhudson8649]

Excellent video. I thought I would have to call Fidelity to find out if I can invest more than 250K in brokered CDs and still be FDIC protected. You answered it perfectly and saved me a lot of trouble. Thank You. RH

[@TheKid30912]

Great video thanks Jen. I live in NY so T-bill is a no brainer

[@mlkrinsky]

Your videos are so useful! Despite my partner and my advanced degrees we still need these talks that simplify and breakdown rationale and strategy! I would love one on “option trading for dummies”. I have some large gains in some old tech investments, and would like to understand how to hedge these bets. Thank you and Happy Thanksgiving!

[@krigerja]

Excellent knowledge and easy to understand presentation...........

[@sheilagrayman7147]

I am grateful for your knowledge and informative content. Thank you so much.🌺

[@joannepalmisano9545]

Jennifer - these are terrific videos. Thank you!

[@andrewlivingston5105]

great video. trying to help out my mom with this and this video gives a very good description.

[@Papi_WT]

Yes please make a video about how to buy brokered CDs

[@Anthony-ko3ep]

Hi Jennifer, I will make this short, Thank You! very educational.

[@johnbeeck2540]

Happy Thanksgiving! Great point about the CDs being callable. Lately at Fidelity you can get 2-3 year CDs that are not callable if you shop their offering - generally at a minor yield reduction.

[@DiamondNestEgg]

Happy Thanksgiving to you & yours too!

[@mrlakuda]

Plenty of non-callable three, six, nine and 12 month cds

[@cocolola007]

thank you for this video!! 😊

[@policyprosagency385]

Thanks as always for the details in your videos. You are really great. I purchased my first T bill and I bonds because of your knowledge

[@DiamondNestEgg]

Glad the videos have been helpful!

[@manuvns]

there are 5% CD available form big banks now! you can buy a mix of short tem TIPS and BOND fund ETF and chill!

[@gieb6428]

You always have what I need when I need it. Great

[@Richard.Cabeza]

Excellent presentation. Informative, direct and I really like the “what my preference is and why”. My first time here, thumbs up and I will subscribe and check out all your other content. Thank you for putting this together. VERY helpful.

[@TomGioia]

In the financial crisis most failed banks deposits were acquired by healthy banks . FDIC insurance only was the savior in rare situations where no healthy bank stepped in . Also with Congress controlled by the Margeret Taylor Greenes of the world I am more worried about a Treasury default . Great video

[@MikeKoPhotography]

Just found your channel. Great content. This videos is especially timely as I'm deciding between cds and t bills. Rally appreciate you breaking down the + and -. And I especially appreciate your reasons for going with t bills. Thanks

[@briaf3370]

Jennifer nailed it again! She’s simply the BEST

[@marlenasf]

Yes please make a "How to" on buying brokerage CDs. Should I buy within my Roth IRA or Traditional IRA?

[@DiamondNestEgg]

Here you go: kzbin.info/aero/PLsv_4H5rP97Fe5-eXzDte14IYMEKHP7nc

[@liwang4357]

Timely Video. Thank you!

[@HibaAlMasri]

Hi, thanks for the video. Note: callable is NOT for all CDs, that was not clear in the video. and that option would be stated on the CS

[@vasanthallampalli4099]

Super video! I now know a lot about brokered CDs.

[@Thisishard2333]

Thank you for all your great advice

[@DiamondNestEgg]

Glad you enjoyed the Thanksgiving day post!

[@anddocster]

I agree w K. Please put on a ‘How to buy brokered CD”

[@DiamondNestEgg]

Here is the Fidelity one: kzbin.info/www/bejne/qYXGlmSco5domK8 We have videos on how to do this on Schwab & Vanguard as well

[@m.fazlurrahman5854]

TAX and admin costs are the only two consideration for any investments. Holding period return lowers admin cost ( leaving Tax component out of consideration) now do the math and see which is better and why.

[@go-goyubari8776]

She is fabulous! I am so happy I found this channel.

[@bstephenson5684]

VIDEO REQUEST: Intro to T-bill and CD secondary markets AND To Rollover t-bills or not to Rollover. THANKS!!

[@DiamondNestEgg]

Noted - stay tuned in the new year

[@phwayne]

I would be interested in your thoughts about the effect of holding T-bills if the federal debt ceiling is not increased by the payment deadlines.

[@DiamondNestEgg]

Stay tuned