What Are Brokered CDs? Should You Invest in One? Bank vs. Broker CD Pros and Cons
There are several similarities as well as differences between Bank and Broker CDs.
Brokered CDs can be traded on a secondary market. There is a secondary transaction fee involved, and you may lose or gain money depending on whether
the current interest rates are lower or higher, respectively, at that time. Bank CDs have an early withdrawal penalty if you take out your money before CD maturity.
Brokered CDs use simple interest, while Bank CDs use compound interest rates.
Brokers offer you a wider selection of bank CDs from many banks and institutions, and all CDs (bank and broker) are FDIC protected to $250,000. However, that is done on different terms.
You can usually find better returns on Brokered CDs. However, Bank CDs use compound interest rates, while Brokered CDs use simple rates.
You also have to make sure the CDs you invest in are call protected.
How are CDs taxed? You should receive 1099-INT each year you have the CD. They are not treated as investment securities, so you don’t get the long-term capital gains tax rates rather, they are taxed as ordinary income.
————————CHAPTERS—————————————
00:00 - Intro
00:30 - What are CDs?
02:25 - FDIC Protection
03:35 - Minimum Investment in CDs
04:11 - Fractional CDs
04:45 - Are CDs Frees? Are There Any Fees?
07:20 - Interest Rates & Returns
09:43 - Callable CDs
10:30 - Auto Re-enroll Programs
11:05 - How are CDs Taxed?
———————————LINKS—————————————————
Articles on Brokered vs. Bank CDs:
https://www.nerdwallet.com/article/ba...
https://tickertape.tdameritrade.com/i...
————————What are CDs?——————————————
https://www.fidelity.com/fixed-income...
https://www.investopedia.com/terms/b/...
https://www.investopedia.com/best-cd-...
————————FDIC Protection——————————————
https://www.investopedia.com/terms/f/...
https://www.fdic.gov/resources/deposi...
————————Brokered CDs (need account)——————————————
https://www.fidelity.com/fixed-income...
————————Interest Rates & Returns——————————————
https://www.bankrate.com/banking/cds/...
https://financialmentor.com/calculato...
https://www.investopedia.com/personal...
————————Callable CDs——————————————
https://www.investopedia.com/terms/c/...
————————How are CDs Taxed?——————————————
https://www.investopedia.com/are-cds-...
#taxguide101 #akistepinska
——————————DISCLOSURE———————————
The information presented in this video is for informational and educational purposes only. It is not intended to render tax advice for any specific situation. Those needing assistance with a specific situation should consult with a qualified Tax Professional.
The information in this video is based on current tax law and IRS regulations as of date of publication and is subject to change.
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