Here's Why I'm Not Opening CDs This November -- Even With Rates at Over 4%

Motley Fool11-14 21:00

KEY POINTSCD rates are still strong despite a couple of rate cuts from the Federal Reserve this year.I'm not opening a CD this month because doing so doesn't fit with my goals.I'd rather set myself up...

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The Federal Reserve didn't seem to be in a rush to lower interest rates, and many savers got to lock in CDs at 5% for a pretty long stretch.That streak may be over, though. The Fed has already made two interest rate cuts this year, and more are expected. At this point, 5% CDs definitely aren't the norm.But it's more than possible to open a CD in the 4% range. Whether you're able to lock one in at 4.25%, 4.5%, or 4.75% will depend on your bank and the length of your CD's term. But today's rates are still quite competitive, so it's worth it to check out this list of the best CD rates today.But while CD rates still look pretty good on a whole, I don't plan to open one this month. I also don't see myself opening a CD anytime in the near future, even though I know that might mean missing out on the chance to lock in a CD before rates fall quite a bit. Here's why.Our Picks for the Best High-Yield Savings Accounts of 2024Capital One 360 Performance SavingsAPY4.00%                        Rate info                Circle with letter I in it.      See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Oct. 23, 2024. Rates are subject to change at any time before or after account opening.      Min. to earn$0Open Account for Capital One 360 Performance SavingsOn                          Capital One's             Secure Website.                                                  Member FDIC.                                              APY4.00%                        Rate info                Circle with letter I in it.      See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Oct. 23, 2024. Rates are subject to change at any time before or after account opening.      Min. to earn$0American Express® High Yield SavingsAPY4.00%                        Rate info                Circle with letter I in it.      4.00% annual percentage yield as of November 14, 2024      Min. to earn$0Open Account for American Express® High Yield SavingsOn                          American Express's             Secure Website.                                                  Member FDIC.                                              APY4.00%                        Rate info                Circle with letter I in it.      4.00% annual percentage yield as of November 14, 2024      Min. to earn$0CIT Platinum SavingsAPY4.70% APY for balances of $5,000 or more                        Rate info                Circle with letter I in it.      4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY      Min. to earn$100 to open account, $5,000 for max APYOpen Account for CIT Platinum SavingsOn                          CIT's             Secure Website.                                                  Member FDIC.                                              APY4.70% APY for balances of $5,000 or more                        Rate info                Circle with letter I in it.      4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY      Min. to earn$100 to open account, $5,000 for max APYWhen a CD doesn't fit in with your goalsAlthough it's tempting to lock in a CD somewhere in the 4% range, that return doesn't work for me. Call me greedy, but I'd prefer to earn a much higher return than that.That's why I'm putting my spare money into stocks this month. And you may want to open a top-rated brokerage account and do the same.Over the past 50 years, the S&P 500 has averaged an annual 10% return, accounting for years when stock values soared and years when they plunged. Investing in stocks is a dangerous thing on a short-term basis, because you need time to ride out market downturns. But since the thing I'm most focused on saving for -- my retirement -- is still pretty far off, it makes sense for me to put my money into stocks instead of settling for the return a CD might give me.In fact, I hope to be in a position to bank an extra $1,000 by the end of November (helped by the fact that I tend to be a holiday shopping procrastinator who saves the bulk of her purchases for December). If I open a 12-month CD at 4.5%, I get to earn $45. If I'm somehow able to earn 4.5% on a $1,000 CD I renew for the next 20 years, I'm looking at earning $1,411 on it.But if I invest my $1,000 at an average annual 10% return over the next 20 years, I could end up with $5,727 instead. That's a much more appealing number.Don't panic-open a CD before rates fallA lot of people I know are rushing to open CDs before rates drop even more. And if you have a near-term goal you're saving for, then I'd encourage you to do the same.But if you're talking about money you're earmarking for a far-off goal, like retirement, then I strongly recommend investing in some shape or form. You could stick to a regular brokerage account, or open an IRA for the tax benefits involved if you're specifically looking to save for your senior years.Even if you don't end up snagging a 10% yearly return in your portfolio, there's a good chance you'll end up doing better than what today's top CDs are paying. So there's no need to settle for 4.5% or something in that vicinity when stocks may easily deliver twice that return, or even more.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2483880687"}