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Passive investing generates income that requires little or no effort to earn, maintain and grow that income. Passive investing examples include dividends from dividend stocks, 401(k), Roth IRA, interest from high yield savings account and dividends from REITs. Learn more about what are passive investments, different types of passive investments and how to get started.

How to Buy Brokered CDs on Charles Schwab

07.11.2023 by admin // Leave a Comment

Whether you’re seeking a safe and stable way to grow your money, or have a big purchase coming within the next year it’s worth looking into certificates of deposits (CDs). CDs help you maximize returns on a low risk investment. For the past decade or so, CDs haven’t offered very attractive rates. With interest rates rising, short term CDs are now paying 5%+. Instead of searching for the CDs that offered the best yields, you can go to Charles Schwab, or another brokerage firm, and buy CDs offered by another bank. These CDs are called Brokered CDs. In this post, we’ll walk you through the process of buying brokered CDs on Charles Schwab and answer frequently asked questions.

What is A Brokered CD?

A brokered CD is a type of certificate of deposit that is bought and sold through a brokerage firm, such as Charles Schwab. Unlike traditional CDs that are typically offered directly by banks or credit unions, brokered CDs are issued by various financial institutions and made available to investors through brokerage platforms.

How do Brokered CDs work?

Brokered CDs are issued by banks, thrift institutions, and credit unions. These are the issuers of brokered CDs. These financial institutions offer the CDs to brokerage firms. Then, the brokerage firms make them available to individual investors.

Investors can access brokered CDs through brokerage platforms like Charles Schwab, Fidelity, or TD Ameritrade. These brokerage platforms provide a wide selection of CDs from various issuers, offering investors greater choice and flexibility. On the platform, it’s easy to browse one month CDs, 3 month CDs and CDs of longer term lengths.

Unlike traditional CDs, which are held until maturity, brokered CDs can be bought and sold on the secondary market. This means that investors can sell their CDs before they reach maturity, potentially allowing for liquidity and flexibility. However, you may not get a favorable price by selling it early.

Why Buy Brokered CDs?

Before getting into how to buy brokered CDs on Charles Schwab, why should you buy brokered CDs? Brokered CDs are bought and sold on the secondary market through a brokerage firm. They typically offer higher yields and have a wide selection of CDs offered by different banks. You are able to use an account you already have, instead of creating an account at every bank that is selling the CD.

What Should You Look For When Buying a Brokered CD?

Brokered CDs typically come with specific terms, including the maturity date and interest rate. Maturity dates can range from a few months to several years, so pick the maturity date that aligns to your personal financial goals and needs.

The price and yield of a brokered CD can fluctuate based on market conditions. Issuers sometimes offer different rates at the same time, so if you want a 3 month CD, check to see how the yield of that CD compares to other 3 month CDs.

Lastly, check if the CD is callable. A callable CD can be redeemed by the issuer before its maturity date and is more risky than a non-callable CD.

How to Buy a Brokered CD at Charles Schwab

To buy a brokered CD at Charles Schwab you will need a brokerage account. If you do not have a brokerage account, go to Charles Schwab and click “Open an Account.” You’ll need provide personal and financial information as well as transfer funds after the account is open, and it usually takes a few days before the cash is available to trade or buy brokered CDs.

Once you have a Charles Schwab brokerage account:

Log in and open the “Trading” tab
Click on the “CDs” heading
On the “CDs” page, scroll down to “Maturity” and click the APY link beneath the term length you want to buy. For short term, focus on 1 month, 3 month, 6 month, 9 month and 12 month CDs.
Select the specific CD you wish to purchase by clicking “buy” on the left column within the table. Make sure to look at the “coupon” column for the yield for that CD and the “maturity” column to see the end date for that CD.
On this screen you will now see the settlement date. That is when the CD starts. You’ll also enter the dollar amount (Schwab is in thousands so the minimum is $1,000 and can add in increments of $1,000) as well if you want it to auto-roll into a new CD at maturity or keep it as “no” to get the cash back plus interest at maturity. Keep the limit price the same and hit “review order.”
Review and hit continue
Order is now placed
Once your order is complete, you will see the money removed from your cash and the CD in your account.

How Do You Redeem A Brokered CD?

When you are buying a brokered CD, the website will state the date when the CD will mature. As that date gets closer, Charles Schwab will send you a notification that a fixed income security is maturing soon. This serves as reminder only, when the CD matures the cash will be deposited directly into your account. You don’t have to do anything. Sometimes it does take a day or two for the interest to show up in your account.

Are Brokered CDs FDIC Insured?

Most brokered CDs are FDIC-insured up to the maximum limit allowed by law, currently set at $250,000 per depositor, per institution. This insurance protects the principal investment and any accrued interest in case the issuing bank fails. On the website, you can check if the CD you’re interested in buying is FDIC-insured.

Are you charged fees to buy brokered CDs through Charles Schwab?

To see the latest fees Charles Schwab charges for CDs, and all fixed income products, you can see their latest fixed income pricing here.

Why To Buy a Brokered CD at Charles Schwab vs Directly At The Bank Issuer

If you already have an account at the bank issuing the CD, it’s easy to buy the CD directly with them. With CD rates increasing so rapidly this year, I found that many of the CDs with the best yields were at smaller banks I didn’t have a relationship with. Instead of creating a bunch of new accounts with these local banks, I found it easiest to buy these high yield CDs through Charles Schwab. That way, I still only had one banking account, and could see all of the CDs I purchased in one place.

How to Buy Brokered CDs at Charles Schwab Summary

Buying brokered CDs on Charles Schwab is a straightforward process. You have access to a wide range of CDs from different issuers and can see all the CDs you purchased in one place. By following the steps outlined in this guide, you can confidently navigate the platform, select suitable CDs, and have the money directly deposited in your account at time of maturity. Remember to conduct thorough research, assess your investment goals, and regularly monitor your CD investments. With CD rates rising, brokered CDs can be a valuable addition to your portfolio, especially for money you’ll need somewhat soon and you want to earn high interest on it in the meantime.

Turning Tight Finances Around: How Long-Term Investments Can Generate Cash

04.11.2023 by admin // Leave a Comment

In today’s uncertain economic climate, many individuals and families struggle with tight finances, finding it difficult to make ends meet and save for the future. And, in the short term, you can bootstrap your budget and reduce your spending as well as raise fast cash. However, to truly turn tight finances around a long-term approach is necessary. It includes investing in yourself and using your time to generate cash either through your career, side-hustles or passive investing. And, in parallel, it’s important to commit to a disciplined investment strategy and taking advantage of compound interest. By pursuing both of these, individuals can create a sustainable source of income that can help them achieve their financial goals. In this article, we will explore a few long-term approaches to generating more cash in the future and turning tight finances around.

Don’t Pay Off Your Low Interest Debt Early

It’s always tempting to pay off debt like your mortgage and car loans off early. But, if you got a mortgage or car loan in the last 5-10 years chances are you locked in a low rate. With high yield saving accounts rising above 4% and Treasury bills rising above 5% you may already be able to generate cash by putting extra money in safe investments than putting extra money towards paying down low interest debt early. Even though it may feel better to reduce your debt, do the math and see if it’s better to pay off your debt on time or pay it off early. Given the current economic uncertainty, it’s always better to have a little extra cash in your emergency fund just in case.

Keep Your Existing Job

One of the biggest investments you can make is investing in yourself, and investing in how you spend your time. We moved from the “Great Resignation” to what feels like the “Great Layoff” in a matter of months. You don’t want to be the person that’s the most expensive but delivering the least! That combination usually is high risk for a layoff with the layoffs start. At minimum, make sure you’re performing in the top 50% to reduce your risk of getting laid off.

Increase Compensation At Your Job

You can find a job externally and get that pay raise but be extremely aware of how your skill set matches that pay because you do not want to be the one let go. Another approach is to strategically network, work hard and get a promotion in your current company. Though it is harder to get promoted in the current environment, opportunities do still exist. You’ll want to be positioned well when those doors open so make sure your boss, bosses boss, mentors and sponsors know your career goals. If you do end up getting laid off take these steps to stay financially stable and get a new job quickly.

Corporate Recognition Programs

Does your company have any recognition programs where you can get cash or points to buy something for a good job? Go above and beyond on a current project to get rewarded. Don’t forget, part of increasing your odds of being recognized is to be good at giving recognition to your coworkers when they do a good job too.

Take Advantage of Corporate Benefits

Go to your company’s internal website and really learn about all of your corporate benefits. You could be paying for wellness services and items and turns out your company reimburses part of that. Same with cell phone plans, subscriptions, vacations and more. To really make an impact, focus on areas you’re already spending money so that it results in a savings.

How does your compensation compare to the market?

Check Blind, and Glassdoor for roles that are similar to yours at other companies. Colorado also recently passed an Equal Pay for Equal Work law. You can find jobs posted in Colorado similar to yours to see the salary range. Note you may need to factor in a cost of living adjustment. If you are being paid less than you’re worth, use this as a negotiating tactic.

Look for Promotion Opportunities

Do you know what it takes to get to the next level? Ask your manager what gaps you need to work on to secure that promotion. Ensure that both your manager and their manager know your career goals. Create a targeted plan to look for that next step. If it’s unlikely a promotion opportunity will open up in your current org, know what orgs will likely have roles open that meet your skill set. Then, start networking with those managers and teams.

Buy Treasury Bills

A Treasury bill is a short-term debt obligation issued by the U.S. government. They have different maturity time frames including 3 month, 6 months, 9 months, a year and longer fixed timeframes. T-bills are sold at a discount to their face value. This means you will pay less than face value. Then, you’ll receive the interest + initial principle (face value) when the T-bill is redeemed at maturity. Recently, the yields got as high as 5% in early March, but have cooled off to 4%+ more recently. You can buy Treasury bills at Charles Schwab, other brokerages or Treasury Direct.

Buy Certificates of Deposits

A certificate of deposit (CD) is a type of financial instrument issued by banks and credit unions that allows customers to invest money for a fixed period of time at a fixed interest rate. Recently, CDs have been offering higher interest rates than high yield savings accounts and Treasury bills. A trade-off is customers agree to keep their money in the CD for that specified term. Terms can range from a month to a few years. CDs can be bought through banks and brokered CDs can also be bought through brokerages.

Put Your Cash In a Money Market Fund or High Yield Savings Account

While you’re planning how to best make more money in the long term, put your cash in a money market fund or a high yield savings account. A money market fund is a type of mutual fund that invests in short-term, low-risk securities. Examples of these securities include commercial paper, Treasury bills, and certificates of deposit. These funds aim to provide a higher rate of return than traditional savings accounts or checking accounts while maintaining a relatively low level of risk. Money market funds can be purchased at brokerages like Charles Schwab, Vanguard and Fidelity.

A high yield savings account is a type of savings account that offers a higher interest rate than traditional savings accounts. These accounts are typically offered by online banks and financial institutions. The best yield high yield savings accounts have been offering changes frequently. It’s good to check once a month to see if you’re still getting the best rate.

Series iBonds

The interest rate for Series iBonds are not as high as early last year. So, Series iBonds are a good investment to have on watch although they may not be the best investment now given the current interest rates offered by Treasury bills and CDs. Until April 2023 the interest rate offered is 6.89%. You’ll earn that interest rate for the first 6 months and then will follow whatever interest rate is the set rate.

The Series iBonds are a longer term way to earn extra cash because you must hold for at least a year. After a year passes, you only lose 3 months of interest as penalty up until you’ve held for 5 years. There are some tax benefits too – you never have to pay state income tax on the interest gains! You can only buy up to $10,000 / year per person.

Due to the limitations, the Series iBonds don’t make sense for everyone but are potentially good to consider if you have a large purchase you will make in the next year or two.

Play the Long Game With Investing

Research and Form Thesis with Your Stock Investments

Have your investments been on auto pilot the last few years? Or, have you been picking the “hot” stock of the week or busy “buying the dip”? Learn how to navigate volatility and update your investing strategy accordingly. Learn about what you’re investing in, and technicals. A good place to start is learning about the 4 stages all stocks eventually go through and the stages where you make the most money. Generally, long term investing outperforms short term investing; however, it depends on market conditions and when a person buy / sold. Keep in mind that not all companies perform well over time. Don’t just buy the dip, because it could keep dipping. Do your research, form your thesis and then be patient. When your thesis breaks, sell the stock. Alternatively, put it on auto pilot with index funds and dollar cost average.

Buy Alternative Investments

While most investing discussed is around the stock market and real estate, don’t forget that physical items can be investments too. One study that looked at retired Lego sets found that on average they returned 11% a year. Business Insider found that Rolexes out performed houses, gold and the Dow Jones over the last decade. While previous performance may not be representative of future performance, it’s good to consider alternative investments as part of your investment portfolio.

How do you plan to make more money in 2023?

2023 Roth IRA Rules: What You Need to Know

02.02.2023 by admin // 4 Comments

A Roth IRA is a type of individual retirement account that allows for tax-free withdrawals in retirement in the United States. In 2023, the contribution limit for a Roth IRA is $6,500 for those under the age of 50 and $7,500 for those 50 and over. There are many benefits to having a Roth IRA including no minimum distribution and no taxes on any gains. Contributions to a Roth IRA are made with after-tax dollars and qualified withdrawals, including earnings, are tax-free. There are income limitations for contributing to a Roth IRA, and early withdrawals may be subject to taxes and penalties. It’s important to understand Roth IRA rules and requirements in order to make informed decisions about saving for retirement.

What Is A Roth IRA

A Roth IRA is a retirement account that offers you a tax benefit when you retire. Unlike traditional IRAs and 401(k) plans Roth IRA contributions are not tax deductible but you also do not pay taxes when you withdraw money at age 59 ½ +.

Roth IRA Contribution Limits 2023

The 2023 Roth IRA contribution limit is $6,500 for the year. If you’re 50 or older you can contribute up to $7,500 for the year. These contribution limits increased by $500 compared to 2022. So, if you haven’t contributed to your Roth IRA in 2022 yet, you can still contribute up to $6,000 or $7,000 if you’re 50 or older before April 15th. The amount you contribute also cannot exceed what the IRA defines as “earned income” or taxable compensation. This includes wages, salaries, tips, commissions, professional fees and self-employment income. Charles Schwab shares more details here on what’s considered earned income for a Roth IRA.

The amount you contribute to a 401(k) plan does not impact the amount you can contribute to a Roth IRA but the amount you contribute to a Traditional IRA will affect the amount you can contribute to a Roth IRA. If you contribute to both a IRA and Roth IRA in the same year, the total contributions to both of these accounts cannot exceed $6,500 if you’re under 50, or $7,500 if you’re 50 or older.

Setting Up A Roth IRA For A Child

You can also set up a custodial Roth IRA for your child, subject to the same contribution limits outlined above. This means that contributions for your child’s Roth IRA you control cannot exceed what your child earned in 2023.

Roth IRA Income Limits 2023

There are income limits on Roth IRA eligibility which is why it’s important to start your contributions to a Roth IRA the first year you get a W-2. If you are single, and your modified AGI is $138,000 the amount you can contribute to a Roth IRA begins to phase out. You cannot contribute to a Roth IRA in 2023 as a single filer if you make more than $153,000.

If you are married filing jointly and your AGI is $218,000 or above the amount you’re eligible to contribute begins phasing out. If you are married filing jointly you cannot contribute to a Roth IRA if you make more than $228,000 in 2023. Once you exceed this income you will need to explore options to setup a backdoor Roth IRA if you’re interested in having a Roth IRA. To take full advantage of a Roth IRA, set up a Roth IRA when you first start collecting a paycheck. You never know when you may get to the point where your income makes you ineligible to contribute to a Roth IRA.

Here are the contribution limits by income and filing status for a Roth IRA in 2023:

roth ira rules 2023, roth ira 2023 contribution limit — Source: IRS

When Can You Contribute to a Roth IRA

Contributions to a Roth IRA can occur at anytime during the year. You may contribute the full amount all at once or contribute multiple times during the year up to the maximum. Once a new calendar year starts, you can still make contributions for the previous calendar year up until April 15th (when taxes are due). For example, you can make a contribution for 2022 to your Roth IRA until April 15, 2023.

Roth IRA Withdrawals

Since you’ve already paid taxes on your contributions, you can withdraw your contributions at any time with no restrictions. If you withdraw earnings on those contributions though, you may be taxed or penalized on withdrawing this money.

Roth IRA rules dictate that once you’re age 59 ½, as long as you’ve held the account for at least five years, you can take distributions on all money within the account and do not have to pay taxes on that money.

Roth IRA Minimum Required Distribution

With a Roth IRA there is no required minimum distribution. You don’t ever have to withdraw from this account if you don’t need to. Additionally, you can pass this money onto your heirs.