Isn't the FDIC funded by individual bank contributions? In a true panic the FDIC could run out with no guarantees the government would step in to back up private banks. Maybe they would. But it's a lot different than the safety of treasuries. Plus, even if you were able to get your FDIC guarantee there could be a long delay from when you could actually get at your funds.pugchief wrote: ↑Tue Dec 03, 2019 4:49 pmFor instance, here is a 55 month at 2.6% or 84 month at 3.05% https://www.andrewsfcu.org/Learn/Resour ... cate-Rates. And I bonds are illiquid for 1 year, where as a CD is not. Also not sure the govt FDIC would allow default any differently that the US govt with treasuries.sophie wrote: ↑Tue Dec 03, 2019 10:17 amCan you share? The highest 5 year CD that I can find is paying 2.15%. This is effectively much worse than I bonds for me, as they are subject to state and local taxes. I bonds are not PLUS they're tax deferred. This is another substantial benefit for me...potentially another 10% or greater tax savings on top of the 11% with state/local.
Also, you pay the same 3 month interest penalty (and possibly more) with a 5 year CD if you break it early. So I'm not quite following your logic here? Also, all CD agreements have a little gotcha buried in them to the effect that the bank can deny or delay your request to cash in a CD before maturity. Treasury direct has no such limitations on selling an I bond.
The one advantage of a CD is that if inflation rates drop, I bond interest will drop accordingly but the CD will remain constant. Of course it works the other way too, if interest rates rise. And of course you can break the CD in year 1 if you choose to. But if you're buying a 5 year CD (or an I bond) you hopefully have at least a year's worth of expenses socked away in a more liquid form, such as a savings account or money market fund.