Pentagon Federal Offers CDs at 5.5% to 6.0% APY

Posted on December 29, 2005 // 4 Comments

I’ve blogged about Pentagon Federal Money Market Cerificates (CDs) before, including how to join, previously. PenFed has just announced new rates, and several of them are very competitive –

3 Year CD – 5.5% APY
5 Year CD – 5.75% APY
7 Year CD – 6.0% APY

They have relatively generous early-withdrawal penalties of 180 days interest for the 3- and 5- Year CDs, and 1-Year of interest penalties for 7-Year CDs. I wouldn’t abuse this, but here is a plot of estimated interest versus hold time for the 3 CD lengths that takes into account the penalty.

It seems like the 5-Year certificate is the most versatile. May be useful for those that want to lock in a decent rate, as these rates beat out any that I’ve found on Bankrate, etc. I’m not sure if I’m going to go in, I already have some older CDs at 5%.

Filed Under: Banking //

Comments

  1. Jim B says
    December 30, 2005 at 6:18 am

    What are your thoughts on investing in a tax-exempt money market or bond fund? It would seem to me that if you are in the 25% or higher bracket, these might make sense…

    Reply
  2. A says
    December 30, 2005 at 10:05 am

    3+ years CDs lock the money too long… Why? A typical recession typically lasts for 2-3 years…

    Reply
  3. Jonathan says
    December 30, 2005 at 10:54 am

    Jim – I haven’t found any tax-exempt money market funds that consistently offer the same level of low risk and equivalent returns – otherwise I’d definitely be interested. Any suggestions?

    For example, Vanguard’s VMSXX is currently yielding 3.21% fed tax free, about the equivalent of 4.28% in my 25% tax bracket. This is pretty good currently, but historically VMSXX has mostly lagged the top yielding online banks.

    However, I am currently looking at some higher-risk AAA or so muni bond funds that pay a pretty nice rate.

    Reply
  4. Christopher says
    January 1, 2006 at 2:29 pm

    Have you guys looked at any of the closed end funds such as the Nuveen Preferred and Convertible Income Fund 2 stock symbol jqc. It was recently highlighted on Nightly Business Report on PBS and is currently yielding around 8.3% at its current price. I’m not very familiar with them and wanted to know what the risk were besides a possible price decline. Thanks

    Reply

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