Getty Images/iStockphoto
Interest rates on certain savings accounts have increased in recent years, giving savers a way to buffer their effects inflation And higher borrowing costs. Depending on the account chosen, the guaranteed rate and the amount deposited, savers can earn hundreds even thousands dollars with the correct account being opened now. However, as the interest rate environment evolves, the benefits of these accounts will evolve as well.
This is especially true for certificates of deposit (CD) accounts, which are locked prices for the complete CD term, no matter what happens in the higher interest rate environment. Understand this security and predictability – and the likelihood of a lowered to the federal funds rate later this year, some savers may be considering making a significant six-figure deposit into one of these accounts.
Long term CDscan be particularly attractive because savers can earn high interest on their money for years. But is one $100,000 Long Term CD worth opening now or are savers better served by parking their money elsewhere? That’s what we’ll break down below.
See how much you could make with one of today’s best CD rates here.
Is a $100,000 long-term CD worth opening now?
As with most personal financial decisions, the value of a $100,000 deposit into a long-term CD (longer than 12 months) is specific to the individual. That said, there are some pros and cons of converting this deposit amount into a CD at this time that may help you make your decision. Here’s what to consider:
Why You Should Put $100,000 Into a Long-Term CD Now
The interest is an important motivating factor for making such a high deposit now. You can now get a 4.61% rate on a 3-year CD and a 4.50% rate on a 5-year CD (although this may involve shopping around and using a CD). online bank to obtain these rates). Thus, a $100,000 deposit would result in a return of $14,477.36 on the three-year option and a return of $24,618.89 on the five-year option.
That’s a significant amount of money you can make by simply leaving your money untouched in one of these accounts. And it will be a guaranteed, predictable return, regardless of what happens in the wider economy. Even if the bank where you have your money goes bust, you’re covered for up to €250,000 per account, so you’re fully protected with a €100,000 deposit.
So who should consider opening a long-term CD with this down payment? Anyone who can easily part with $100,000 for the full term might consider this option (if you can’t and have to withdraw it early, you’ll be stuck with a fine to do this).
Conservative savers who want to earn returns but do not want to take the risks associated with playing the stock market or investing in property or alternative assets might also want to pursue these types of CDs. Parents and seniors who have money they want to leave to beneficiaries may now find this down payment amount on this type of CD beneficial as well. Those who think current CD rates are fading and want to capitalize as much and as quickly as possible may also find this CD combo useful.
Get started with a long-term CD here today.
Other Considerations
A six-figure deposit into a CD is a lot of money for a long time and many economists would advise against it, arguing that the returns don’t justify putting the money away. Instead, investing in other, more volatile assets will likely (but not guaranteed) result in greater returns. $100,000 can also be used as a down payment on a house, to start a new business, or to pay off (or pay off) high-interest debt. It could also be used renovate your home, increasing its value far beyond any return you would get on a $100,000 long-term CD.
But all of these alternatives will require work and, in some cases, significant risk. Savers will have to weigh these disadvantages against the advantages mentioned above to truly determine if this is the best option for their money.
it comes down to
Only you know whether a $100,000 deposit into a long-term CD is truly valuable. Weigh the pros and cons carefully before taking action, but don’t delay a decision for too long. With inflation cooling and the likelihood of rate cuts increasing, CD rates won’t remain this high for much longer. So if you decide to take action, now is a good time to do so.
Read more about all your CD options online now.
