Author Topic: [SOLVED] Where to park $600k for 6 months liquid and insured  (Read 4182 times)

FIRE Back

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[SOLVED] Where to park $600k for 6 months liquid and insured
« on: January 12, 2016, 03:10:06 PM »
Task
I'm looking for a safe place to park $600k for a maximum 6 months liquid and insured. I'd like to maximize the dividend rate and minimize the number of institutions required to stay insured. I'm considering CD and savings account products.

There is a standard $250,000 insurance maximum per institution so I would divide it between 3 institutions offering the highest rate.

Another CD option would be a single CDARS institution (http://www.cdars.com/home/find/find-cdars/?state=CA). I'd be interested in first hand experience regarding the single CDARS institution CD route vs. 3 separate institutions.

Questions
Anyone have experience/recommendations with these two options or see additional options?
What online banking service do you use and why? Top 2 reasons.


Noteworthy recommendations from forum members

Jumbo CD
US Treasury Bonds http://www.treasurydirect.gov/
Ally Online Savings Account: https://www.ally.com/bank/online-savings-account/
Discover Online Savings Account: https://www.discover.com/online-banking/savings-account/
Synchrony Online Savings Account: https://www.synchronybank.com/banking/index.htm
Compare Online Bank Rates: https://www.depositaccounts.com/

Observations
CDARS Banks can consolidate amounts above $250k into a single institution but the rates and services are generally substandard.
US Treasury Bonds are both the safest and least convenient option.
Private banking can be used to negotiate one's own terms for large sums. This generally requires local and/or a more personal relationship.
Online Savings account rates can be highly competitive with both local and online 6 month CD rates.

[SOLVED]
2 products and 3 institutions for an optimal balance of rate, liquidity, insurance, and services. The dividends from the first 2 institutions set to auto transfer monthly to the third.

1. Local B&M Credit Union 6 Month Term CD. $250,000 @1.15%*
2. Synchrony Online Savings Account. $250,000 @1.05%*
3. Ally Online Savings Account. $100,000 @1.0%*
Rates as of 01/12/2016
« Last Edit: January 16, 2016, 12:46:02 PM by FIRE Back »

matchewed

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #1 on: January 12, 2016, 04:22:04 PM »
I'm assuming you also need it safe given you want it insured. Then the CD/Savings is the best route for you.

SwordGuy

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #2 on: January 12, 2016, 05:00:44 PM »
I believe you can set up an account for yourself, another for your spouse, and a third for the two of you, all at the same bank and all fdic insured.

Our laws are stupid, what can I say?

bobechs

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #3 on: January 12, 2016, 05:09:17 PM »
It's not so safe, but the return could be substantial:

Park it in Powerball lottery tickets for a day.

MustacheAndaHalf

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #4 on: January 12, 2016, 05:57:14 PM »
Does something prevent you from parking the money in an online bank like Ally or Discover Bank?  Your restriction "insured in Orange County CA" greatly limits your options.  Online savings offers about 1% interest, while most local banks will offer you just above 0%.

http://www.bankrate.com/financing/investing/cdars-protects-your-money-but-what-about-the-cd-rates/
Quote
One drawback to the service is that you have no control over the CD rates you receive, and you get the same rate on all the CDs issued at that time.

Typically the yield through CDARS will be lower than the highest yields available. Banks pay transaction fees in the CDARS network and the cost is translated into lower CD rates.

GGNoob

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #5 on: January 12, 2016, 06:23:01 PM »
I don't think there is any interest with this account, but you can park all of your cash and it's insured up to $1,250,000: https://www.fidelity.com/cash-management/fidelity-cash-management-account/overview

protostache

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #6 on: January 12, 2016, 06:42:28 PM »
The US Treasury.

http://www.treasurydirect.gov/

Getting the money back is a little awkward, because the Treasury doesn't let you sell bonds directly. You have to transfer them to a bank or broker and have that entity sell them for you. That said, you can't get safer than T-bonds held directly.

FIRE Back

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #7 on: January 12, 2016, 07:23:42 PM »
Thanks everyone for the quick responses and valuable information.

I'm assuming you also need it safe given you want it insured. Then the CD/Savings is the best route for you.

Correct on all points.

I believe you can set up an account for yourself, another for your spouse, and a third for the two of you, all at the same bank and all fdic insured.

Our laws are stupid, what can I say?

Great point. Just not a viable option for me.

Does something prevent you from parking the money in an online bank like Ally or Discover Bank?  Your restriction "insured in Orange County CA" greatly limits your options.  Online savings offers about 1% interest, while most local banks will offer you just above 0%.

http://www.bankrate.com/financing/investing/cdars-protects-your-money-but-what-about-the-cd-rates/
Quote
One drawback to the service is that you have no control over the CD rates you receive, and you get the same rate on all the CDs issued at that time.

Typically the yield through CDARS will be lower than the highest yields available. Banks pay transaction fees in the CDARS network and the cost is translated into lower CD rates.

Thank you for the outstanding response. The three top local credit unions will match each others rates for a Jumbo CD via introductory special offer and they appear competitive with the online banking rates. The local credit unions also offer a variety free services and discounts like free movie tickets so that is a very small subsidiary factor. That is not to say I would not consider an online bank that offered superior rates and service so I will look into them further.

The CDARS information you provided is consistent with what I've gathered. I also called several local CDARS banks. Their rates were lower and they did not meet my standard of professionalism. The 3 institution route (brick and mortar, online, or combination thereof) appears to be a better option.

The US Treasury.

http://www.treasurydirect.gov/

Getting the money back is a little awkward, because the Treasury doesn't let you sell bonds directly. You have to transfer them to a bank or broker and have that entity sell them for you. That said, you can't get safer than T-bonds held directly.

Sound advice. I think I'll accept the risk of NCUA Federal insurance with the credit unions for the convenience and additional services.
« Last Edit: January 13, 2016, 01:38:19 PM by FIRE Back »

MustacheAndaHalf

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #8 on: January 12, 2016, 11:46:22 PM »
So I looked up "orange county credit union rates", and found their FDIC insured savings is 0.05%.  When you keep $200,000 at 0.05%, you are receiving about $8/month.  If you trust just one online bank with your money, the FDIC insured $200,000 earns 1%/year, or $165/month.  Would you switch banks if they give you $150/month to switch?   Because.. they do!

I personally like Ally (customer service and high rates), but you can find several online savings offering 1% rates on savings.  If you're nervous, try this small step first: deposit $10,850 in an online savings (which is FDIC insured) and $200,000 in your local bank (earning 0.05%).  And when you see $200,000 earning $8.33 while the $10,850 earns $9.00 it might convince you.  :)  Good luck.

OldStachesRule

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #9 on: January 13, 2016, 12:07:54 AM »

I recommend you research "Private Banking" which cater to high net worth individuals.  Typically you need +1M liquid assets, but there are exceptions.  With 600K you fall into what is called the mass-affluent or merging-affluent market.  Some smaller, local relationship-oriented banks may cater to you.  In private banking, the bigger you are the greater the perks, no different than whales in Vegas.  Everything is negotiable including CD rates.  Good luck.

FIRE Back

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Re: Where to park $600k for 6-12 months liquid and insured
« Reply #10 on: January 13, 2016, 12:59:49 AM »
So I looked up "orange county credit union rates", and found their FDIC insured savings is 0.05%.  When you keep $200,000 at 0.05%, you are receiving about $8/month.  If you trust just one online bank with your money, the FDIC insured $200,000 earns 1%/year, or $165/month.  Would you switch banks if they give you $150/month to switch?   Because.. they do!

I personally like Ally (customer service and high rates), but you can find several online savings offering 1% rates on savings.  If you're nervous, try this small step first: deposit $10,850 in an online savings (which is FDIC insured) and $200,000 in your local bank (earning 0.05%).  And when you see $200,000 earning $8.33 while the $10,850 earns $9.00 it might convince you.  :)  Good luck.

Thanks again for your helpful information. Orange County Credit Union is not among the 3 credit unions I'm considering. I took a closer look at Ally. Their online savings account has a higher rate (1.0%) than their money market account (.85%). Their 6 month Jumbo CD is only .67% APY which is below what one of the credit unions will provide as a introductory offer (1.15%) for the same term. I'm not sure why the 6 month CD rate is so low compared to the mentioned 1.15% credit union offers.

Still, the 1.0% online savings account you mentioned appears to be a good place to park up to $250k. It's fully insured, completely liquid, and I can transfer the monthly dividends above the insured $250k to another online bank or credit union. I think not having the funds tied up for 6 months is worth the .15% rate reduction.


I recommend you research "Private Banking" which cater to high net worth individuals.  Typically you need +1M liquid assets, but there are exceptions.  With 600K you fall into what is called the mass-affluent or merging-affluent market.  Some smaller, local relationship-oriented banks may cater to you.  In private banking, the bigger you are the greater the perks, no different than whales in Vegas.  Everything is negotiable including CD rates.  Good luck.

This is very good information. Thank you sir!
« Last Edit: January 13, 2016, 05:00:01 AM by FIRE Back »

act0fgod

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Re: [SOLVED] Where to park $600k for 6-12 months liquid and insured
« Reply #11 on: January 13, 2016, 04:36:14 PM »
What is the solution you went with?

Another Reader

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Re: [SOLVED] Where to park $600k for 6-12 months liquid and insured
« Reply #12 on: January 13, 2016, 04:44:59 PM »
You can find several of Ally's competitors offering similar or better rates over at www.depositaccounts.com.  I have relied on that source for many years, and it's thorough and accurate. If you want to go the CD route for 12 months, there are several at 1.25 percent.  I just opened a CD at Synchrony for 14 months at 1.30 percent. 

FIRE Back

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Re: [SOLVED] Where to park $600k for 6-12 months liquid and insured
« Reply #13 on: January 13, 2016, 05:28:32 PM »
What is the solution you went with?

Yes, thank you. 2 products. 3 institutions. I'll keep my original post updated.

You can find several of Ally's competitors offering similar or better rates over at www.depositaccounts.com.  I have relied on that source for many years, and it's thorough and accurate. If you want to go the CD route for 12 months, there are several at 1.25 percent.  I just opened a CD at Synchrony for 14 months at 1.30 percent.

Thank you for the link. It is very helpful and I added it as a resource in my original post.  I know I originally mentioned 6-12 months but I'm finding 6 months to be my maximum comfort level.
« Last Edit: January 14, 2016, 03:54:37 AM by FIRE Back »

MustacheAndaHalf

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Re: [SOLVED] Where to park $600k for 6 months liquid and insured
« Reply #14 on: January 14, 2016, 12:19:52 AM »
Glad the advice was helpful.  I found Ally bank after reading "I Will Teach You To Be Rich", which is a bit of a modern, young, practical take on dealing with money.  (Right now, $2 for kindle version, or free at your library)
http://www.amazon.com/Will-Teach-You-Be-Rich/dp/0761147489/ref=sr_1_1

FIRE Back

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Re: [SOLVED] Where to park $600k for 6 months liquid and insured
« Reply #15 on: January 14, 2016, 03:49:17 AM »
Glad the advice was helpful.  I found Ally bank after reading "I Will Teach You To Be Rich", which is a bit of a modern, young, practical take on dealing with money.  (Right now, $2 for kindle version, or free at your library)
http://www.amazon.com/Will-Teach-You-Be-Rich/dp/0761147489/ref=sr_1_1

Good find. I rarely have use for fiat currency beyond the monthly expenses and a small emergency fund so my banking needs are minimal. Additional money on hand is a rare and temporary inconvenience for this FIRE'd frugal minimalist.

My sincerest thanks to you and the other helpful members who responded rather quickly with valuable and actionable information. I enjoyed learning from you all. I will consolidate the data into my original post so that others may benefit from it as well.
« Last Edit: January 17, 2016, 03:14:46 PM by FIRE Back »