Should You Open a Long-Term CD This April?

The Federal Reserve convened earlier this month and declared it would continue the rate pause It has been in effect since the start of the year. The Federal Reserve's choice probably indicates that certificate of deposit (CD) Rates will remain unchanged for now, as certificate of deposit (CD) rates typically align with adjustments in the Federal Reserve's key interest rate. This is positive news for savers since CD rates continue to be high following their peak over the last few years. Actually, accounts that have at least 4% can be easily obtained from numerous banking institutions.

When purchasing CDs, you generally face two main options: long-term CDs with durations exceeding one year and short-term CDs lasting twelve months or fewer. Each type offers fixed interest rates along with assured earnings and represents a minimal risk investment strategy. In today’s financial climate, long-term CDs present an intriguing possibility due to their competitive rates and the extended period required for committing funds, prompting consideration about whether this might be suitable for your circumstances at present.

Given this consideration, is opening a long-term CD Is it worth considering this April? Below, we will outline what you should keep in mind.

Find out how much you might earn with a long-term CD right here today. .

Is it worthwhile to open a long-term CD this April?

Multiple elements render long-term certificates of deposit a compelling saving choice this April:

You'll get more opportunity to browse.

Due to the Federal Reserve’s choice to maintain current interest rates and its next meeting being scheduled for May, substantial changes in Certificate of Deposit (CD) rates are unlikely this month. This lack of immediate rate adjustments gives savers an opportunity to search for a long-term CD offering a favorable rate that suits their requirements.

According to Geri Hopkins, the chief operations officer at Skylark Federal Credit Union, “The top priority for all savers looking to boost their CD earnings is to compare different options.” She adds, “It’s worth checking out online institutions and credit unions since they generally provide better interest rates compared to traditional big banks with physical branches.”

Not only can you take the time to locate the best long-term CD rates, but you also have the opportunity to build a CD strategy that includes long-term and short-term CDs , such as a CD ladder or CD barbell .

Both approaches capitalize on the strengths of a long-term CD — utilizing compound interest for an extended period — while offsetting the illiquidity of a long-term certificate of deposit (many CDs impose) early withdrawal penalty if you remove your funds before reaching maturity) compared to short-term certificates of deposit (CDs), which provide you access to your money upon their expiration. mature within one year or less.

Secure your long-term CD rates today .

You can still achieve substantial profits.

Because CD rates will likely stay relatively high amid a Fed rate pause this April, you can lock in considerable returns through long-term CDs. Here's what you can earn from a $5,000 long-term CD at some of today's top rates , according to Bankrate:

• 18-month CD at 4.16%: $315.22 at maturity, bringing the total to $5,315.22
• 2-year CD at 4.15%: $423.61 upon maturity, bringing the total to $5,423.61
• 3-year CD at 4.15%: $648.69 upon maturity, bringing the total to $5,648.69

Here’s how much you might earn with a $10,000 long-term CD based on some of the current best interest rates available now:

• 18-month CD at 4.16%: $630.45 at maturity, bringing the total to $10,630.45
• 2-year CD at 4.15%: $847.22 upon maturity, bringing the total to $10,847.22
• 3-year CD at 4.15%: $1,297.38 upon maturity, totaling $11,297.38

Your funds still require protection.

The Fed is taking a wait-and-see approach to its rates as there's a level of uncertainty over where the economy is headed this April and beyond. Additionally, inflation is still running higher than the Fed would like it to, even though February's rate dropped slightly The convergence of these two elements underscores the importance for individuals saving money to safeguard their funds against potential market volatility while ensuring they receive a returns rate that exceeds the inflation rate.

In April, long-term certificates of deposit (CDs) can achieve these objectives by securing interest rates that currently outpace inflation. Additionally, they offer returns that will stay constant regardless of how the economy performs throughout the duration of your CD’s term.

Moreover, certain economists harbor an opinion that The Federal Reserve might decrease interest rates later this year. However, that’s not guaranteed. Should interest rates drop later in 2025, following the opening of your long-term certificate of deposit (CD), the rate you’ll earn on the CD you open this April will stay unchanged.

Hopkins suggests that with new economic and geopolitical strategies, along with anticipated Federal Reserve interest rate reductions, securing a certificate of deposit at a rate in the mid to high 4% range would be a prudent choice for individuals who can keep their funds untouched for one to two years.

The bottom line

Long-term certificates of deposit offer great returns over time as they allow your funds to grow via compounded interest. Nonetheless, the key consideration with opening a long-term CD is that numerous accounts impose early withdrawal fees if you remove your money prematurely. maturity If liquidity is a concern for you, Hopkins suggests setting up a CD ladder.

They recommend that individuals concerned about keeping their funds locked away for long durations explore a CD ladder approach, which offers periodic access to cash on either a monthly, quarterly, semi-annual, or yearly basis," she explains. "A lengthier CD ladder allows savers to benefit from increased interest rates associated with longer-term deposits.