I am currently getting 1.3% in a high yield savings account offered
online by Amex. Now the only CD's offering more than 1.3% are in the
2+ year maturities. Does it make it any sense to buy a 2+ year CD
given this? I have $50k I want to invest and I know I will not need
the money for at least several years.
I couldn't advise you via this NG even if I wanted to so do NOT take this as
The trap with long term CDs lies in the unknown future. Back in the "good
old days" I knew folks who refused to buy a 20 year CD that was paying 15+
because they didn't want to miss out "when rates went up." Oh how we all
wish we had such a CD today.
Generally, I have no problem with CDs, but I usually prefer laddering them -
breaking them up into multiple CDs with varying maturities. This allows you
to cash out 1 or 2 while leaving the rest in place - it can save you some
early surrender fees and keep some of the money in place.
Gene E. Utterback, EA, RFC, ABA
"Gene E. Utterback, EA, RFC, ABA" writes:
On the other hand, see what the early withdrawal penalties are.
For example, Ally Bank (FDIC insured) has a flat 2 month penalty,
even for CDs as long as 5 years. With such a short penalty it
doesn't take long for going with the longest-term certificate
to pay for any penalty vs. laddering and working to avoid a penalty.
Rich Carreiro email@example.com
Another possibility is a "bump" CD - starts out at a slightly lower
rate, but gives you the option to increase to the current rate at any
time, one time only. The safety of a CD plus the thrill of gambling...