CD investing rules made to be broken

Hand putting coin in white piggy bank

I confess. Where CDs are concerned, I’m a habitual rule-breaker.

It’s not that I intend to violate all those rules I’ve established about which CD terms are acceptable and which are not. It’s that I don’t have the intestinal fortitude to follow them.

For example, when I first got into certificates in late 2008, I adopted a CD investing rule that I’d never settle for 12-month rates less than 2% APY.

Needless to say, with "accommodation" rampant at the Fed, this didn’t long survive. Today, much of my portfolio consists of 12-month certificates with APYs ranging from 1.45% all the way down to 1.10%.

I also once pledged that I’d never establish a certificate with a maturity greater than two years.

I adopted this rule because I couldn’t conceive that the Fed would keep short-term rates near zero for more than two years. I didn’t want to be trapped in a long-term deposit account once rates returned to "normal" levels.

Silly me. Everyone else apparently knew that "extended period" meant "forever."

Naturally, I redrew the line at three-year CDs, so I could still get annual yields exceeding 2%. I continue seeking favorable 36-month deals (a goodly chunk of my investments nowadays), but these keep getting harder to find.

So, guess what? I’m now ignoring the three-year limitation and dabbling in 5-year terms.

Can seven- and 10-year maturities be far behind?

Do I ever really mean it when I say, "Thus far and no farther?"

Another rule I created early on was that no certificate of more than a year could have a prohibitive early-withdrawal penalty or require the bank’s consent to redemption prior to maturity.

This hasn’t lasted. I liked USAA Bank’s 2.25% APY 36-month CD -- and Androscoggin Bank’s 5-year 12345 CD -- too much.

One other rule I had was that all my certificates should pay interest that I could withdraw at least quarterly. After all, as a senior, I need the cash flow.

But I’ve flushed this down the toilet along with the rest.

(Darn it, that 1.45% APY on Incredible Bank’s 12-month offer, capitalizing interest until maturity, was too tempting to resist!)

You get the point. My lack of credible rules about certificates of deposit has destroyed my self-esteem.

Do I have a defense to my blatant disregard of solemnly adopted rules? No. But I offer circumstances in mitigation:

Ben Bernanke made me do it.

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