Is a long-term CD still worth it?

Between cooling inflation and the current pause on federal interest rate hikes (despite expectations the Fed will make additional rate increases this year), choosing the best place to park your savings may suddenly seem a bit complicated.

Certificates of deposit (CDs), in particular, are one savings vehicle where timing makes a big difference. These accounts carry fixed interest rates, so the APY offered when you open your account won't change over the entire term.

Locking in your rate at the peak becomes even more important when your goal is to earn current high rates as long as possible with a long-term CD. But there are still plenty of reasons why a long-term CD can make sense for your financial plan today.

Learn more about the best CD rates available today here.

Is a long-term CD still worth it?

Locking in a long-term CD can still be a good choice in today's rate environment. Here are some reasons you may want to still consider one for your portfolio.

Inflation is cooling

The latest Consumer Price Index reported inflation at its lowest in over two years, growing at an annual rate of 3%. That means the Fed's interest rate hikes are working — and if the trend continues, it could potentially lead to a more extended rate pause.

"Given that inflation is showing signs of cooling off, the Fed's interest rate hikes will likely slow down and taper off in the near future," says Natalie Taylor, CFP, founder of Natalie Taylor Consulting Services.

If the Fed's interest rate hikes slow, so will the rates offered by banks. So if you're looking to lock in peak rates, cooling inflation could be a sign we're near the top end of what banks will offer on long-term CDs during this cycle.

"This could mean that longer-term CD rates will start to adjust downward between now and the end of the year, so if a CD aligns with your risk tolerance and time horizon, locking in a rate sooner rather than later may benefit you," Taylor recently told  CBS News. 

Explore some of today's top CD rates with varying term lengths now.

Rates are still high

Luckily, there is plenty of cash to be made from long-term CDs today. Depending on your term, you may be able to lock in upwards of 4.5% APY — comparable to what variable-rate high-yield savings accounts are offering.

For example, here are some top long-term CD rates available now:

• Bread Financial 3-year CD: 4.75% APY
• Popular Direct 3-year CD: 4.75% APY
• First Internet Bank of Indiana 5-year CD: 4.59% APY
• Barclays Bank 5-year CD: 4.50% APY

With any of these accounts, you can lock in today's high rates for years to come. And because CDs carry fixed interest rates, you'll guarantee you receive the full amount of interest earnings when your CD matures (as long as you don't withdraw early and take on a penalty fee).

Say, for example, you deposit $10,000 in a five-year CD earning 4.50% APY today. When your CD matures, your initial balance plus the interest accrued will be up to $12,461 in total. See how much more you could be earning with a top long-term CD rate today.

Building a CD ladder

If you're not quite ready to deposit your full balance in a long-term CD today, you may want to consider building a CD ladder.

With this method, you divide your total savings balance across CDs with varying term lengths (one-, two-, three-, four- and five-year terms, for example). As each CD matures, you can roll it into a new CD while still maintaining the longer initial CDs. 

By doing so, you'll lock in today's high rates with longer CDs, but if rates do go up over the next year, you'll have access to a portion of your funds (in the one-year CD) to put into a new, higher-earning CD. And if rates go down, you can rest assured you have some money still earning peak interest for several more years.

Consider talking to a trusted financial advisor who can help walk you through the details of CD ladders and whether this type of savings plan may be right for you.

The bottom line

Depending on your savings goals, long-term CDs may be worth opening today. Not only are savings rates already high on these accounts, but cooling inflation could lead to banks lowering the rates they offer on CDs and savings accounts over the next several months — meaning we could be near the best time to lock in a fixed rate. Even if you're not sure you want to put your full balance away, you may also consider creating a CD ladder with accounts that mature at different points over time, including longer-term CDs.