Time to consider a CD ladder?
For the first time in my wealth management career, we are getting calls seemingly every day about CD rates.
As the fed continues to raise rates, savers can finally be rewarded for cash. CDs, Treasuries, and Bonds are becoming more attractive with opportunities north of 5 percent!
I had a client ask what rates were looking for short-term. This is an example of a short-term ladder I sent her as of 03/07/2023:
3-Month CD 4.75% Annual Yield
6-Month CD 4.85% Annual Yield
9-Month CD 5.0% Annual Yield
12-Month CD 5.15% Annual Yield
These rates are higher than we have seen in over a decade. The treasury market is comparable as well.
Who should consider it?
Those that have cash set aside and don’t intend to use it for the next few years. These rates are higher than they have been for a long time.
Who shouldn’t consider it?
While these rates are attractive, we are not suggesting chasing this yield by selling other investments. We also don’t recommend using your emergency funds to buy a CD.
Why a ladder?
Rates are fluctuating. We haven’t seen the fed raise rates this fast in 40 years. Laddering is a strategy that will structure the CDs to come due at different increments in time, allowing for you to take advantage of the new rates once the CDs mature.
Word of Caution
Rates are subject to change. Though we haven’t seen them this high in a while, they may drop just as fast. On the flip side, they may double. Like we always say with these types of products, we can tell you exactly what your return is going to be if you hold them to maturity. We just can’t tell you how happy you will be.
Interested?
Brokered CDs are subject to market fluctuation and availability. CDs in general may be subject to early withdrawal penalties. The FDIC insures bank CDs up to $250,000. Most brokered CDs at Raymond James require a minimum purchase of $10,000. Raymond James bank allows a minimum balance of $5,000 for CDs, and $2,000 for IRA accounts.