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CNBC
15-07-2025
- Business
- CNBC
These banks are still paying 4% yields on CDs. How to figure out whether you should lock in
The Federal Reserve is in a holding pattern on interest rates – and some banks are similarly keeping a steady hand on yields for certificates of deposit. In June, average CD rates were relatively unchanged on the month, according to a July 7 report from Morgan Stanley. The highest average CD rate among the banks in the firm's coverage ticked up 1 basis point to 3.94%. The average rate on one-to-12-month CDs inched higher by 1 basis point to 3.9%. One basis point equals one one-hundredth of a percent, or 0.01%. Earnings calls from banks should shed some light on where CD yields are heading next, said Morgan Stanley analyst Betsy Graseck. "Our expectation is portfolio CD rates should be down in 2Q as longer term CDs continue to mature, but the benefit should fade until we get the next round of rate cuts," she wrote. The Federal Reserve's stance on interest rate policy affects CD rates. Central bank policymakers have kept the fed funds target rate at 4.25% to 4.5% since December, and CD yields – though well off highs that once exceeded 5% – are still rich if you know where to look. Rates topping 4% Though CD yields aren't high enough to keep up with inflation over the long term, they can reward investors who want to earn some interest on idle cash. "I have clients with extra cash where we have plenty invested in markets, and this is a buffer if they need it," said Catherine Valega, certified financial planner at Green Bee Advisory in the Boston area. Investors who recently had their CDs mature are locking up in three-to-six-month instruments for now, she said. "To me, it's the shorter term that's the sweet spot of the curve, versus the longer term," Valega added, noting that investors can opt to stagger short-term maturities. This means buying several CDs with varying maturities – say three, six and nine months – and taking advantage of the highest yields. As those CDs mature, investors can decide how to move forward with the proceeds, including whether they want to redeploy that money into the market. "When that 4% gets closer to 3%, we start thinking, 'Let's get some of this money out of cash and into the stock market,'" Valega added. Banks offering annual percentage yields (APY) exceeding 4% include Sallie Mae, which touts a 4.2% yield for a 12-month CD, and Popular Direct, which pays a 4.4% APY on a 12-month CD. Keep your time horizons and goals in sight Even while yields are attractive, investors should proceed carefully before they lock up their money in a CD. Those who "break" a CD prior to its maturity are subject to penalties, so be sure you can commit money you won't need right away. If you'll need access to your funds, a high-yield savings account or a money market fund might be a more prudent choice. Consider that the Crane 100 Money Fund Index has an annualized seven-day yield of 4.11%. Just be aware that banks and fund families can and do adjust those rates at any time. "Make sure you understand what you need the money for and your goals for it in the long- and short term," said Matt Schulz, chief consumer finance analyst at LendingTree. "I do think generally speaking that if you're looking to maximize your rates, it's a good time to lock that down now."
Yahoo
03-06-2025
- Business
- Yahoo
Advisors Say $1,000 ‘Trump Accounts' Won't Benefit Families Who Need Help Most
Are your clients planning on having children? Tell them to hurry it up. Inside the Trump administration's key $4 trillion tax bill is a proposed idea to open accounts for each new baby born in the US until 2028. The so-called 'Trump Accounts' are seeded with $1,000 that gets invested in equities and locked up until the child's 18th birthday. Parents can also contribute up to $5,000 annually. Previously called MAGA accounts, the funds are designed to help parents prepare for their children's financial futures. But, what do advisors think about the proposed accounts? 'They are stupid,' said Catherine Valega, an advisor with Green Bee Advisory, adding that the wealthy have plenty of options to save, while the less affluent won't be able to afford additional contributions. READ ALSO: Bitcoin Rules for Now, but the Crypto Landscape Is Vast and RIA Headcount, AUM Shattered Records in 2024 The idea of funding accounts for newly born children is nothing new. In fact, before the current administration, the accounts were called 'Baby Bonds' and have been floated by politicians on both sides of the aisle. Well-known financial advisor Ric Edelman has been a prominent supporter of the idea, and even started a trust product with annuities for babies in 1999. But today, most advisors said the proposed Trump accounts will largely benefit upper-class families who can afford to contribute annually. 'The real advantage will go to families with enough disposable income to consistently fund the account,' said Edzai Chimedza, a CFP and advisor at Tobias Financial, adding that it's an attractive tool for upper-middle-class and affluent families, who are more likely to be able to contribute after covering essentials, like retirement savings and emergency funds. The accounts aren't the only savings options out there, either. Who can forget those 529 plans that have grown significantly more flexible over the years and are a great option to save for college, Valega asked. A guardian Roth IRA can also help children jump-start their retirement savings, while helping them get up to speed with the stock market. Baby Got Tax. For families that can pitch funds into the accounts, it makes sense to stop and think about a client's intentions, said Sarah Avila, an advisor with VLP Financial Advisors. 'If you are eligible to open the account for your baby, it is worth it to get the free $1,000 from the government,' she said. But clients should be aware that earnings on qualified withdrawals will be taxed at long-term capital gains rates. 'If the idea is to save for college, contributing to a 529 plan is more advantageous, from a tax perspective, because the money is tax free,' she said. This post first appeared on The Daily Upside. To receive financial advisor news, market insights, and practice management essentials, subscribe to our free Advisor Upside newsletter.
Business Insider
29-05-2025
- Business
- Business Insider
4 ways to shrink your debt payments when your wallet feels stretched
Carrying debt can feel like a massive weight. When you owe money to lenders, it can be difficult to save and invest — both of which are important steps to reaching financial milestones like retirement. And yet many Americans are in this position: Total household debt hit $18.04 trillion in the fourth quarter of 2024, according to data from the Federal Reserve Bank of New York. A recent report from Lending Tree found that on average, Americans put $1,597 a month toward paying off debt. When you're paying for housing, utilities, groceries, and more, allocating a chunk of your budget to paying back lenders isn't easy. Debt can be an important part of a healthy financial life, especially when it's used to fund things that will grow in value or increase your earning potential, such as a house or an education. But holding debt — especially high-interest debt like credit card debt — can be extremely stressful. While the long-term goal is usually to be debt-free, there are steps you can take now to shrink your debt payments and give your budget a little room to breathe. 1. Negotiate with your creditors The terms of your loans may seem set in stone, but they could actually be negotiable. "If you have private loans and are having trouble paying, the loan servicing company is often happy to work with you," says Catherine Valega, financial advisor and founder of Green Bee Advisory. "Start by calling them and discussing your options." Valega says to say you're calling to ask for more lenient loan servicing terms, then explain to them what is impeding you from being able to make payments — such as losing your job or having medical bills. Tell them you've created a budget of your basic needs, not wants. Using that budget, identity and tell them how much you have left each month to pay toward your loans. 2. Consider refinancing Refinancing a personal loan allows you to pay off your existing loan with a new one, essentially replacing that existing loan with one that ideally has better terms. "Refinancing can be a good option for lowering your payments and lowering your interest rate," says Kassi Fetters, financial planner and founder of Artica Financial Services. She recommends checking the options at your local credit union when refinancing your loans or credit card debt. Keep in mind that if you refinance to a loan with better rates but a longer repayment period, you may increase the total amount of interest you'll pay over time. 3. Consolidate your debt Debt consolidation loans replace multiple debt payments with a single one, and you may be able to snag a lower rate and monthly payment this way. "While it can definitely make paying back loans easier, be sure to fully understand the new interest rate and payment, and compare it to the sum total of the other payments," Valega says. If you're dealing primarily with credit card debt, you may want to consider transferring your balance to a 0% APR credit card. The catch here is that companies only give you a certain amount of time with the 0% APR, often between a year and 18 months. After that time period is up, the rate will increase, so you want to be sure you can pay off the debt before that happens. 4. Seek professional help For borrowers who are really struggling, debt relief companies (also referred to as debt settlement companies) can negotiate with lenders on your behalf to reduce the total amount you owe. When debt gets overwhelming, debt settlement could be a lifeline that stands in the way of declaring bankruptcy. Debt settlement companies step in to negotiate with your creditors, asking them to settle for less than you originally owed. This option enables you to enroll multiple debts, make a single monthly program deposit, and get a concrete timeline (usually 24-48 months) for when all your enrolled debt will be resolved. Note that most debt settlement companies require unsecured debts of at least $7,500 to be eligible for the program. That's not to say debt settlement companies are a perfect solution: You'll pay a fee for their services, your credit score can suffer, and there's no guarantee that the company will actually be able to get you a lower balance — ultimately, it's up to your creditors. If you want to tackle the debt yourself, you can also seek out credit counseling agencies or other nonprofit resources that offer debt consultations with no fee. If you decide to go with a debt relief company, check that it's verified with the Association for Consumer Debt Relief, the International Association of Professional Debt Arbitrators, or the Consumer Debt Relief Initiative. By law, debt relief companies can't charge upfront fees. If a company tries to charge you before negotiating with your creditor and getting your approval on the settlement, choose another company instead.
Boston Globe
03-04-2025
- Business
- Boston Globe
As Trump's tariffs roil stock market, investment advisors urge caution. Some analysts fear ‘economic armageddon.'
Investors fear that the tariffs will Financial advisors urge caution, noting that many of the effects are yet to be seen. Advertisement 'Right now, there are so many questions,' Catherine Valega, a wealth manager at Burlington-based Green Bee Advisory. 'We're talking about US exceptionalism — is that over? Maybe.' One analyst worries about a more dire outcome. 'The only positive is you have to believe this will not stay in its current form,' said Dan Ives, a research analyst at Wedbush Securities, based in Los Angeles. 'Because if it stays in its current form, it would be economic armageddon.' Ives, who specializes in the technology sector on Wall Street, said the tariffs are 'the most absurd thing I've ever seen, period' in his 25-year career. Other investors are just as spooked, he added. 'I'd say it's a panic, it's a crisis, and if this stays in its current form, it guarantees a recession,' Ives said. 'So you have to take the other side and say they can't be that crazy.' Advertisement The 'glass-half-full view,' he said, is that the steep tariffs are just leverage, designed to bring other countries to the negotiating table. Trump administration officials have stressed, publicly and privately, Related : Valega said that the larger investment management firms she works with are still cautious to avoid a panic. 'In theory, things will calm down and and kind of work their way through the system,' she said. 'We're not yet predicting an all-out recession. But the specter is looming.' Most of Green Bee's clients are young enough that they are willing to weather extended periods of volatility. But the older clients, especially those at or nearing retirement age, are the ones who 'feel the most jitters about this,' she said. 'That's kind of what financial planning tells you,' she said 'You thought you could retire at 62, but the reality is we just took a big hit to our retirement portfolio, so [you're] going to have to work till you're 65 or 67.' Many of those clients checking their retirement accounts have expressed shock — and bewilderment. 'People don't understand why this needs to happen,' said Alex Burke, an associate at Dedham-based Financial Solutions. 'Not that tariffs came out of the blue; Trump has been talking about them for a while. But it's [more] like, everything was going okay for my clients. And now, it's not.' Burke said he's been busy assuring clients that, if they've taken the appropriate steps — putting aside an emergency fund, investing in securities with less market exposure, etc. — they should be able to weather the storm. Advertisement 'Most of my clients feel that way,' he said. 'It's just kind of scary watching it happen. And frustrating, knowing that it doesn't feel like there's any real reason for this.' Related : Nicholas Conaltuono, a financial planner at Needham-based Johnson Brunetti, said those best poised to weather the storm are those who have limited their exposure to market volatility. 'If all your money's in the market, and the market's going up and down, who's in control?' he said. 'Is it you or is it the market? If the success of your plan is predicated on the success of the market, that's not a plan. That's rolling the dice.' John Ingram, the chief investment officer at Boston-based Crestwood Advisors, said his firm had been fielding constant phone calls from clients all morning. His advice to the 'nervous types' rattled by plunging tickers? Stay the course. 'It's very hard to trade around this type of news,' he said. 'You didn't know what was happening yesterday when the markets closed, and this morning, it's like a whole new world out there. It's hard to get out beforehand.' Ingram said that any potential announcements, such as renegotiation of the highest tariffs or a stimulus package for domestic industry, could blunt the worst of the impacts. 'We understand the volatility, we know it's painful, but the main thing is to stay invested,' he said. 'We've taken steps to reduce portfolio volatility, and those seem to be holding up okay. I mean, as well as can be expected.' That view is somewhat rosier than the alternative, which is full-blown economic meltdown. But Valega said the financial planning industry is, in a way, one that 'warrants optimism.' Advertisement 'We help people build long term wealth, and so we sort of have to support our clients in a way that that gives them hope,' Valega said. 'So I'm not there [worrying about a recession] yet.' 'But again, I don't know,' she added. 'I might wake up tomorrow and be like, 'Oh God, now we're off the cliff.'' Camilo Fonseca can be reached at
