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Certificate of Deposit (CD) accounts became a popular investment option in recent years as interest rates soared thanks to the Federal Reserve’s anti-inflation policies. Many high-yield CDs offered interest rates above 5.00%, providing an unprecedented opportunity to earn a generous ROI with minimal risk.
For many investors who opened these accounts at this record high CD rates in the post-pandemic era, their CD expiration date may be approaching soon. Their rate is only fixed — and their money is just tied up — until that date arrives.
If you are one of those investors and your CD matures in December, you will have to make some tough choices about what to do with the money invested. However, you have several options, so it helps to know what experts suggest.
See which new CD interest rate you can lock in here.
4 moves you need to make as your CD matures in December
Here are four moves savers should consider if their CD is set to mature in December:
Check for automatic renewal
Anyone whose CD term which expires in December, a crucial step must be taken immediately. “Check your current CD for any automatic renewal provisions,” advises Chad Gammon, a certified financial planner and owner at Custom Fit Financial. “You don’t want to be surprised if you find out that you are unintentionally locked into a new term.”
When your CD term expires, you will usually have a shortfall grace period take action before your bank can renew your certificate at this time CD rates. Those rates could be Good below the returns you were paid.
Unfortunately, if you don’t divert the money and the bank puts you on a new CD with a low interest rate, you’ll be stuck with the CD term if you want to avoid that. early withdrawal penalties.
You don’t want to lose the chance to shop around for one good CD interest rate — or worse, take the time to research the best CD types you can choose now only to find that your choice has been taken away because you’ve already reinvested and are stuck.
Find out now how much your money could make with one of today’s best CD rates.
Think about your financial goals
As long as you have auto-renewal turned off, you can choose what to do with your money when the CD’s maturity date arrives. To make that decision, you need to take the time to think about your goals.
“What to do when your CD expires in December depends on your financial situation,” advises Domenick D’Andrea, AIF, CRC, CPFA, financial advisor and co-founder of DanDarah Wealth Management.
For some people, it may be best to use some of the money for immediate needs. “I suggest using some of the money instead of going into debt during the holidays,” D’Andrea advises, and Gammon agrees. “If you need the money from the CD in the coming months, for example to pay for holiday expenses, it would make sense to use the CD for that,” says Gammon.
If you don’t plan to spend money right away but need the money quickly, keeping it accessible while maximizing your ROI is a top priority. “If you need access to this money in the short term, consider more liquid accounts that still offer competitive rates compared to standard savings accounts,” suggests George McFarlane, president of 7 Waters Advisors. “High-yield savings accounts or money market accounts can be excellent choices in this situation.
While it’s better than borrowing, spending the money from your maturing CD obviously comes with an opportunity cost and isn’t suitable for everyone. “If you have a CD that expires in December, you probably want to reinvest that money to maintain your purchasing power,” advises Jonathan Ernest, an economics professor at Case Western Reserve University.
Research current CD offers
If you decide to reinvest, your risk tolerance, investment timeline, and available alternatives will determine where to put the money. If you’ll need the money in about five years or less, reinvesting your CD may be the best course of action — but you don’t want to just accept whatever rates your bank offers.
“Look for higher interest rates with longer terms, as this can help you earn better returns despite falling interest rates,” suggests McFarlane. “This may mean searching online for rates that are higher than what local banks are offering.”
Gammon also emphasizes the importance of shopping around and suggests there could be good buying opportunities this month. “Research the interest rates of not only your current CD’s bank, but other financial institutions as well,” he said. “There will probably be end-of-year promotions on CDs from some institutions.”
Even with these promotions, current returns can be disappointing. “The Fed has already cut rates by 75 basis points, so you’re not likely to find a rate as high as the maturing CD,” D’Andrea warns.
Like McFarlane, D’Andrea suggests that smaller banks or online banks can yield better rates. He also has some advice on which CD term to choose. “If you want to put this money into a new CD, I suggest you choose the longest term you’re comfortable with, because I think we’ll see interest rates fall even further in the coming years. It’s not likely you’ll you will do that.” able to match current rates again.”
Ernest also points out that while rates are not at their post-pandemic peaks, they are still high by historical standards – especially if you find the best deals.
Discover alternative investment opportunities
Finally, you can consider other investments besides CDs.
“If you have a CD that matures in December, take some time to reassess what your goal for those dollars is before reinvesting. Ask yourself if those dollars should still be invested conservatively or if your time horizon or risk tolerance has changed.” Jeff DeLarme, CFA, CFP and president of DeLarme Wealth Management, Inc. advises.
If you can take on more risk or have a longer term, there are plenty of other investments that can provide better returns than CDs.
“You could explore alternatives to CDs, such as I Bonds or fixed annuities,” McFarlane suggested. “These options often offer slightly higher rates and more liquidity. For example, fixed annuities typically allow you to withdraw 5 to 10% of your balance each year without penalties. They also offer longer terms, allowing you to lock in higher rates for longer periods. “
DeLarme also points out that these alternatives may also have some tax benefits. “A CD is typically fully taxable, while a Treasury Bill can generate interest that is exempt from state income taxes,” he says. “When you consider the potential tax savings, a Treasury bill may be a more attractive vehicle and a more liquid investment compared to some bank CDs.”
Of course, the stock market is also another option. “If you have some risk appetite, you might consider investing in stocks and hoping that a Santa Claus Rally will boost stock prices in the last week of the year,” Ernest suggested.
The good news is that each of these options can make sense under the right circumstances. Just take your time to weigh the pros and cons and decide what’s best – and don’t let your CD renew automatically or you’ll lose the opportunity to make your choice.
Learn more about your current CD options online today.
