Why you should deposit $10,000 into a long-term CD now

No matter what economic climate we're in, it's crucial to make informed decisions about where to park your savings — but it's especially important in today's shifting rate environment. Now that inflation is cooling, rates are expected to decline further in the coming months, so it makes sense to find the best ways to lock in high returns on your cash. And for savers looking for a reliable and low-risk investment option, opening a long-term certificate of deposit (CD) is one way to do that. 

While other savings vehicles, like high-yield savings accounts and money market accounts, offer decent returns right now, their interest rates are variable, meaning they can — and likely will — decrease as the broader interest rate environment shifts. In contrast, a long-term CD locks in your rate, guaranteeing you steady earnings until the account reaches maturity. This makes CDs particularly appealing in a climate where the Federal Reserve has already cut rates once and is poised to continue in the coming months. 

With the right term and rate, the interest you would earn by putting $10,000 into a long-term CD could be significant, helping you grow your wealth steadily and securely over time. But the returns aren't the only reason you may want to make this move now.

See how much more you could be earning on your money with a top CD now.

Why you should deposit $10,000 in a long-term CD now

There are a few reasons it makes sense to deposit $10,000 into a long-term CD now, including:

Rates on long-term CDs are still high 

Interest rates on CDs are still relatively high, making this an excellent time to take advantage by locking in a fixed rate. While the Federal Reserve's interest rate cuts in September have lowered borrowing costs, they haven't yet significantly impacted CD rates, and many banks and credit unions are still offering competitive rates on long-term CDs. For example, it's possible to find a 5-year CD with an interest rate as high as 4.35% now, which is far above the returns you'll find with most standard savings accounts.

By acting now, you can secure this high rate for the full CD term, regardless of what happens in the broader economy. This is especially advantageous because financial markets are anticipating further rate cuts from the Federal Reserve in the coming months. Once those cuts occur, banks are likely to lower their CD rates as well. Depositing your $10,000 now ensures you won't miss out on these favorable rates.

Explore today's top CD rates here.

CD rates could drop soon 

The Federal Reserve is expected to continue cutting rates over the short term, with analysts forecasting additional 25 basis point cuts in November and December. While this may be great news for those looking to borrow money, it presents a challenge for savers. As rates fall, banks typically reduce the interest they offer on new CDs and other savings accounts. This means that if you wait too long, you may miss out.

The longer you wait, the more likely it is that you'll find lower rates when you finally decide to invest in a CD. By depositing $10,000 into a long-term CD now, you're essentially hedging against this risk. You'll be able to lock in a high, fixed interest rate today and earn that rate for the entire term of the CD, even as rates for new CDs drop in the coming months. Waiting, though, could cost you significantly in terms of lost interest earnings.

The returns could be significant 

One of the best reasons to put $10,000 into a long-term CD is the potential for significant returns. For example, let's say you deposit $10,000 into a 5-year CD with an interest rate of 4.35%. Over the five years, you would earn approximately $2,372.34 in interest, bringing your total balance to $12,372.34 by the time the CD matures. That's a substantial return for a low-risk investment.

Even if interest rates drop during that period, you'll continue earning at the 4.35% rate, ensuring that your money works hard for you. This predictability and the higher returns compared to typical savings accounts make a long-term CD an attractive option for anyone looking to grow their savings without taking on additional risk.

CDs offer portfolio diversification and stability 

In addition to the attractive returns, investing in a long-term CD can also play a crucial role in diversifying your investment portfolio. While stocks and bonds offer the potential for higher returns, they also come with increased volatility and risk — and in today's unusual economic climate, you may benefit from adding more stable options to the mix. 

That's where CDs come in. A CD provides a guaranteed return, meaning that it can serve as a stabilizing force in your overall financial strategy. This is particularly valuable during times of economic uncertainty, as it ensures that a portion of your wealth is protected from market fluctuations.

The bottom line

In a financial climate where interest rates are likely to fall, locking in a high-rate, long-term CD can be a smart move. By depositing $10,000 into a CD now, you can take advantage of currently high rates, protect yourself against future rate cuts and enjoy significant returns on a low-risk investment. Plus, you'll have the added benefit of security, knowing that your principal is safe and your returns are guaranteed. Don't wait too long, though, as this opportunity may not last much longer.