Broker Check

Maturing CDs

April 29, 2024

Investors who recently invested in CDs (Certificates of Deposits) within the past 1-2 years have benefitted from the higher interest rate environment, with interest rates ranging from 4-5% depending on the term.  CDs, unlike fully liquid accounts such as savings or money markets, often lock up your money for a specific term and pay you the fixed rate regardless of how interest rates fluctuate. 

In a falling interest rate environment, locking in terms with a fixed rate could be a good hedge against the falling rates because you can continue to earn the fixed rate even as rates fall, as long as you keep your money in the CD for the whole term. However, unlike money markets and savings, CDs do have a maturity date and do require that you take action to reinvest the funds upon maturity, whether in a new CD or something else based on your goals. 

Failure to act and reinvest the funds may result in the funds “rolling into” a new CD that may have a much lower interest rate compared to the current market interest rate.  Therefore, it is important to monitor and manage your cash and CD maturity dates to make sure you are earning the best interest rate based on your needs.