Is a $100,000 long-term CD worth opening now?
Interest rates on select savings accounts have been elevated in recent years, giving savers a way to buffer the effects of inflation and higher borrowing costs. Depending on the account chosen, the rate secured, and the amount deposited, savers can earn hundreds and even thousands of dollars with the right account opening now. As the interest rate climate evolves, however, the benefits of these accounts will evolve, too.
This is particularly true for certificates of deposit (CD) accounts, which come with locked rates for the full CD term, no matter what happens in the greater rate climate. Understanding this security and predictability — and the likelihood of a cut to the federal funds rate later this year — some savers may be considering making a substantial, six-figure deposit into one of these accounts.
Long-term CDs, in particular, can be attractive as savers can earn a high rate on their money for years to come. But is a $100,000 long-term CD worth opening now or will savers be better served by parking their money elsewhere? That's what we will break down below.
See how much you could be earning with one of today's top CD rates here now.
Is a $100,000 long-term CD worth opening now?
As is the case with most personal financial decisions, the value of a $100,000 deposit into a long-term CD (longer than 12 months) is specific to the individual. That said, there are some pros and cons of making this deposit amount into a CD right now that can help you decide. Here's what to consider:
Why you should deposit $100,000 into a long-term CD now
The interest rate is a major motivating factor for making a deposit amount this high now. You can secure a 4.61% rate on a 3-year CD now and a 4.50% rate on a 5-year CD (although it may involve shopping around and the use of an online bank to obtain those rates). A $100,000 deposit, then, would result in a $14,477.36 return on the 3-year option and a $24,618.89 return on the 5-year one.
That's a significant amount of money to be earned simply by leaving your money untouched in one of these accounts. And it will be a guaranteed, predictable return, regardless of what happens in the broader economy. Even if the bank you have your funds with fails, you'll be insured up to $250,000 per account, so you'll be completely protected with a $100,000 deposit.
So who should consider opening a long-term CD with this deposit? Anyone who can comfortably part with $100,000 for the full term may want to look into this option (if you can't, and need to withdraw it early, you'll get stuck with a penalty for doing so).
Conservative savers who want to earn a return but don't want to deal with the risks of playing the stock market or investing in real estate or alternative assets may also want to pursue this sort of CD. Parents and seniors who have money they want to leave to beneficiaries may also find this deposit amount in this type of CD beneficial now. Those who think that today's CD rates are fading and want to capitalize as much and as quickly as possible may also find this CD combination helpful.
Get started with a long-term CD here today.
Other considerations
A six-figure deposit into a CD is a lot of money for a long time and many economists would advise against it, arguing that the return doesn't justify the money being locked away. Investing in other, more volatile assets, instead, is likely (but not guaranteed) to result in bigger returns. $100,000 could also be used as a deposit on a home, to start a new business or to pay down (or off) high-interest debt. It could also be used to renovate your home, thus improving its value far greater than any return you'd make on a $100,000 long-term CD.
But all of these alternatives will require work and, in some cases, substantial risk. Savers will need to weigh those cons against the pros mentioned above to truly determine if this is the best option for their money.
The bottom line
Only you will know if a $100,000 deposit into a long-term CD is truly valuable. Carefully weigh the pros and cons of doing so before acting but don't delay a decision too far into the future, either. With inflation cooling and interest rate cuts growing more likely, the rates on CDs won't stay this high for much longer. So, if you decide to act, now would be a good time to do so.
