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Shortly after I was born (I'm 28 now) my parents set me up with a COD Account. The account has long since matured and renews every three months.
I currently have a shade under $2,700 in the account, and it has a very low interest rate (0.1%) I was laid off last year from a financial services position, and currently work in retail part time and collect partial unemployment benefits as I search for full time work. As a result my income is going to be quite low this year.
So my question is this. Should I take the $$$ out of my COD account now since my income and therefore tax rate is likely going to be quite a bit lower this year than in the future? Or should I just keep the $$$ in the account?
The extra $$$ in my checking or savings account really isn't the issue. I would still be fine financially without it. I'm just wondering if it would make more sense taking it out during a year I have a lower income as opposed to leaving it and perhaps having a bigger hit down the road due to higher income levels I will have when I find something full time.
If uou don't need the money it would make more sense to renew it into a longer term CD.
The interest rate right now still won't make you dream of future wealth but will be better than the lowest rate on a 3 month account.
If you truly have a Certificate of Deposit, the taxes on the interest earned has been due each year as it's been earned. CDs are not like stocks. You don't invest a principal and then owe taxes on gains only when you cash out. Interest on CDs are to be included in your taxes the year that they are owned.
Therefore, even with an interest rate of 1%, on $2700 you would have an extra $27 of income for 2010. With .1%, you're looking at less than $3. Take the money out and see if you can get a slightly better rate somewhere else.
I'm just wondering if it would make more sense taking it out during a year I have a lower income as opposed to leaving it and perhaps having a bigger hit down the road due to higher income levels I will have when I find something full time.
There IS no "bigger hit" on CDs....
you should have been paying tax yearly on the interest, just as Mike From NIUsaid.
I'd pull it on the next maturity date, and put it somewhere else.
Take it out as cash and hide it in your house someplace. The interest it will pay is 1% and there is more than a 1% chance that the entire banking system will collapse and FDIC will be insolvent, and you will be left with nothing. So play the odds and hide it in a shoe. Not to mention the fact that if you have it in cash, the busybodies won't know what you've got, and can't tax it or confiscate it or penalize you for having it. Or take it to a coin dealer and buy a couple of Krugerrands, which might still have purchasing power in a smoldering post-apocalyptic landscape, which is also a >1% risk. The price of gold will never go to zero, and some day, that might be all you've got that is of any value. A small part of everyone's wealth ought to be in that form, just in case.
Take it out as cash and hide it in your house someplace. The interest it will pay is 1% and there is more than a 1% chance that the entire banking system will collapse and FDIC will be insolvent, and you will be left with nothing. So play the odds and hide it in a shoe. Not to mention the fact that if you have it in cash, the busybodies won't know what you've got, and can't tax it or confiscate it or penalize you for having it. Or take it to a coin dealer and buy a couple of Krugerrands, which might still have purchasing power in a smoldering post-apocalyptic landscape, which is also a >1% risk. The price of gold will never go to zero, and some day, that might be all you've got that is of any value. A small part of everyone's wealth ought to be in that form, just in case.
Well, I could try to rebut so much of this, but when dealing with doomsayers, sometimes it's enough to quote Monty Python: "And now for something completely different."
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