Let’s talk about certificates of deposit— commonly referred to as CDs. You’re probably familiar with this common type of account. You may have even invested in one before!
Whether you’re close to retirement or are simply worried about a market downturn, it seems like everyone is looking for a place to grow savings without risk. With safe and steady growth, CDs can be a great investment that can help your nest egg survive economic volatility and uncertainty.
We just announced two new certificate of deposit offerings, both with competitive, higher-than-average interest rates and relatively short-terms. We created these limited-time rates for the market downturn—these terms are long enough for you to wait out the market without tying up your savings for half a decade. Our two-year CD offers 2.48% APY, and our three-year CD offers 2.6% APY—go check them out!
8 Reasons to Invest in a CD
Looking for some specifics on why CDs can be such a great investment? Here are eight reasons why CDs are a great move right now.
1. They have very little risk.
Real estate markets can tank. Companies can fold. Currencies can lose their value overnight. What do you do when you have savings, you’re going to need it in less than five years, and you don’t want to lose out on interest?
Certificates of deposit are one of the safest ways to invest. CDs are a solid option because:
- Deposit accounts are typically insured by the government: If your financial institution is federally-insured, that means that either the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC) offers financial protection up to a certain amount. These two government agencies insure up to $250,000 per depositor, per account ownership category (ie, they cover up to $250,000 for the total of your deposit accounts—not $250,000 per checking, savings, and CD). If you have questions on how this insurance is applied or need more than $250,000 of protection, talk to your financial institution. There are ways to set up accounts for additional coverage, including trust accounts and joint accounts.
- The interest rate is guaranteed: There’s no guessing how much your CD will earn. The interest rate that you agree to when you open your account will be the interest rate that you receive.
These two things can take the stress out of managing money during retirement or a recession. You won’t have to worry about your savings dipping because of a dropping stock market.
2. They are a relatively short-term investment.
Waiting out a recession? A certificate of deposit can be a great place to park your funds while you wait for market conditions to improve. You can find CDs with a variety of term lengths, ranging from a few months to five or more years.
While other investors are losing in volatile investments during a recession, a CD can keep your nest egg growing. Before making any moves from the stock market to a lower-risk CD, be sure to consult a financial advisor! Most experts recommend not jumping out of the stock market at a low point.
3. They can help you preserve capital before retirement.
The years and months leading up to your retirement are not when you want to start losing money. If you take out money to live on in retirement while the market is at its worst, you risk prematurely running out of funds. This is why many financial experts advise taking a more conservative approach with your investing as you approach retirement age.
CDs can be a great way to preserve the money you don’t want to invest in a volatile stock market before and during retirement.
4. You can invest strategically in CDs.
CDs are a straightforward type of investment. There’s no need to check in every day or worry about making trades based on a company’s latest earnings report. However, that doesn’t mean that you can’t formulate a strategy that will help you meet your specific financial goals and needs.
One of the most popular strategies for investing in a CD is called laddering, which involves opening several CDs at varying maturity dates. By doing this, you can ensure that you have the money that you’ll need in the near and distant future, all while maximizing your earning potential.
5. They are easy to open.
The market moves quickly, which means sometimes you need to move quicker.
If a market downturn is expected, moving your money to a CD is quick and easy. It’s similar to opening a checking or savings account and can be done online or at a local branch. There’s no need to jump through the hoops and paperwork like you might need when signing on with an advisor or brokerage firm.
With Amplify, you can open a CD online today. You can open one right after reading this sentence!
6. You’ll earn more than you would with cash accounts.
You may be wondering— why not just keep my money in a checking or savings account?
While keeping your money in other types of bank accounts may mean that your money is liquid, it also means that you may not be earning as much interest as you could be. A CD allows your money to work for you—if you pick a CD with a high interest rate, it can earn more than even the highest-yield savings accounts. This can help you hedge against inflation, all while keeping your money secure.
Many retirees choose to stash a portion of their mandatory distributions in a CD so that it keeps earning.
7. They can provide a steady source of interest income in retirement.
The name of the game in retirement is providing yourself a steady stream of income without dipping too far into your nest egg.
CDs can be a good way to supplement other sources of retirement income, such as Social Security. If you build a CD ladder, you can ensure that your savings keeps earning interest, but you also have money available at different points in your retirement.
8. CDs have low or no fees.
Between trading fees, investor commissions, and other investment-related expenses, growing your money can be costly. If you’re close to retirement, you may not have much to spare. But investing in a CD is cheap—or in some cases, free!
Amplify is proud to provide fee-free CDs to help our members. We make every dollar count for your future.
Ready to open a CD?
If a certificate of deposit sounds like the right investment for you, start comparing your options.
At Amplify Credit Union, we’re offering new and higher rates, our CDs are NCUA insured, and the online opening process is convenient and simple.