What to do when your CD matures in today's rate climate, according to experts

Investor interest in certificates of deposit (CDs) surged in the post-pandemic era as CD rates climbed, due in large part to the Federal Reserve repeatedly raising the benchmark interest rate as part of its inflation-fighting efforts. 

Many investors are now seeing their CDs maturing, and are faced with fewer opportunities to buy CDs at competitive rates thanks to interest rate cuts. So, the big question now is, what to do when CDs mature in today's climate. 

Compare today's top CD rates here.

What to do when your CD matures in today's rate climate

Here are a few of the options you may want to consider in today's rate environment, according to experts. 

Open a long-term CD with the money

While the rates on long-term CDs are down from their recent peaks, many experts believe they're still the right option when you're looking to reinvest funds from a maturing CD.

"If you have a longer time frame, looking into long-term CDs could be a good choice, as they offer low risk and typically higher interest rates," says Chad Gammon, a certified financial planner and owner at Custom Fit Financial. 

CD rates not only remain competitive by historical standards, but CDs also offer a major advantage that variable rates savings accounts can't provide in a declining rate environment: a rate that's locked in for the duration of the CD term.  

"Assuming an investor is seeking a high degree of certainty around investment outcomes, they likely want a product like a CD," says Jeff DeLarme, CFA, CFP and president at DeLarme Wealth Management.  

And for those with the flexibility to lock up their funds, DeLarme specifically advises buying long-term CDs over short-term options. 

"There's some risk in staying too short and investing in what is currently the highest part of the yield curve – potentially missing an opportunity to lock in a slightly lower rate for longer," DeLarme says. "An investor who is constantly having to reinvest because they decided to use one-month CDs might find that after 12 months, they're collecting less yield than if they had locked in a 12-month CD in the first place."

Of course, it's also worth considering what else is currently in your portfolio, as DeLarme believes it's important to "diversify among different maturities and avoid simply going to where the yield is." 

One potential solution Gammon recommends is "laddering CDs," which involves buying CDs with staggered maturity dates, such as a 6-month, 1-year, and 18-month CD. 

"This strategy allows you to lock in higher rates while maintaining some liquidity," he says. 

With this approach, you'd get some longer-term CDs but have more diversity in your portfolio. 

Learn about your best CD options now.

Invest in a high-yield savings account

High-yield savings accounts are another possible option for funds from a maturing CD — and a better choice than long-term CDs if you can't commit to locking up your money for long. That's because CDs have early withdrawal penalties if you withdraw funds before maturity. 

"If you need access to your money within a few months, a high-yield savings account would be a great option, as it offers liquidity and a relatively good return," Gammon says. 

Alex Michalka, Ph.D., and vice president of investment research at Wealthfront agrees, warns that "locking up your money can come with risks." 

Michalka says that there are currently many accounts offering competitive APYs well above the national average. And, while they provide less certainty than CDs, the added flexibility they offer can sometimes be important. 

"While long-term CDs can offer attractive fixed interest rates, they lock up your funds and typically impose penalties for early withdrawal," Michalka says. "This can be a drawback if you need short-term liquidity. For instance, if you're saving for a home purchase within the next year, committing your funds to a year-long CD might not be wise. What if your ideal home becomes available in nine months, and you can't access your savings for the down payment?"

Michalka also warns against putting your emergency fund into a long-term CD, as the money would be inaccessible if an unexpected expense came up. 

"The fact is, high interest rates are wonderful — as long as you still have access to the cash you need when you need it," he says. 

Buy U.S. Treasuries

Finally, buying U.S. Treasuries is another alternative worth considering, as Gammon explains they are a "safe investment, which are backed by the U.S. government and quite similar to CDs."

U.S. treasuries, which include bills, notes and bonds, are loans you make to the U.S. government that are backed by the full faith and credit of the United States. They're low-risk investments that provide fixed-interest payments as well as another big advantage that CDs don't offer. 

"Treasuries are exempt from state and local taxes, allowing you to keep more interest after tax compared to a CD or savings account," Michalka says. 

You can also buy and sell treasuries on the secondary market, which means there's more flexibility than with CDs. However, it's important to compare treasury vs. CD yields, as sometimes CDs offer a more competitive return on investment than treasuries offer. 

The bottom line

Ultimately, the best choice depends on the specifics of your situation, including your goals for the funds, how accessible you need the money to be, and what your comfort level is with different investment choices. 

The good news is that there are multiple good options out there, so it's just a matter of doing your research — or consulting with a financial advisor — to find the one that's right for you.