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Certificates of deposit, or CDs, offer the opportunity to lock in returns for a certain period \u2014 such as a 3-month, 6-month, 1-year, 3-year or 5-year duration.<\/p>\n
To be sure, CD rates will also be affected by the recent Fed cut, as well as any future moves by the central bank to lower rates. So experts say now could be a good time to lock in.<\/p>\n
While 4% returns on cash have been possible this year with money market funds and online savings accounts, that likely won’t be the case next year, Tumin said.<\/p>\n
However, right now there are still CDs available offering 4% rates with durations that carry into next year, he said.<\/p>\n<\/div>\n
For someone who wants a good rate of return that’s safe and conservative while minimizing risk, CDs can be a great option, said Kates. That also goes for someone in or near retirement, he said.<\/p>\n
It is important to understand the terms of the CD before you sign on. Some CDs will charge a penalty if the funds are withdrawn before the term comes due.<\/p>\n
Savers may be able to avoid that if they purchase a no-penalty CD, Tumin said. Those products often require a full withdrawal to access any of the money, he said.<\/p>\n
Laddering CDs, where savings are invested in CDs with staggered maturity dates, can also be an effective strategy. Once a CD matures, it may be reinvested in another CD with a longer maturity, Tumin said.<\/p>\n<\/div>\n
When deciding where to put your cash, the priority should be how the money may be used, Kates said.<\/p>\n
If the money is intended for an emergency fund, where the funds may need to be withdrawn in a pinch, or earmarked for a near-term expense like a vacation or home down payment, a CD may not be ideal, Kates said.<\/p>\n
Savers may also opt to divide their cash between savings accounts and CDs to have liquidity for immediate needs and also lock in returns on a portion of their nest egg, Tumin said.<\/p>\n<\/div>\n
The good news for savers in high yield online savings accounts is those yields are still more than 3%, with a few top-yielding accounts at 4% or better, according to Bankrate<\/a>. Those exceed the 2.9% 12-month inflation rate<\/a> recently posted for the Consumer Price Index for August.<\/p>\n However, as lower rates set in, savers may want to watch to see if the terms on their accounts change.<\/p>\n