Got $10,000? Here's What You Might Earn With a 5-Year CD

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A lot of people are opening CDs right now to take advantage of today's great rates. But the CD rates we're seeing today won't last forever.

In fact, they could start falling as early as next month if the Federal Reserve opts to move forward with its first expected rate cut during its mid-September meeting. So if you're set on opening a CD, August is a good time to take action.

Now there are a number of different CD terms you can choose from. Many people are considering 12-month and under CDs because those are offering some of the best rates today -- with APYs of 5.00% or or even a little higher. But while a 5-year , or 60-month, CD might have a lower interest rate attached to it, it could still be a great bet for you.

The upside of a 60-month CD

If you want the absolute highest interest rate CDs are paying, then you'll probably need to stick to a short-term CD. You might easily lock in a 5.00% APY on a 6-month or 12-month CD, whereas with a 60-month term, you may be looking at just 4.00%.

But a 60-month CD might pay you more money in interest in the long run.

While we know that rates are higher today for shorter-term CDs, we don't know what CD rates on a whole are going to look like in a year from now, or a year after that, and so forth.

However, if you lock in a 60-month CD at 4.00%, you know exactly how much you'll be earning on your money for the next five years. And a 60-month CD may work out better than sticking with a 12-month CD and taking your chances on interest rates after a year.

It's sort of like signing an adjustable-rate mortgage. You might get a more favorable rate and lower payments to begin with. But you're taking the chance that your loan's rate will climb and your monthly payments will increase.

Here, of course, you're not paying money -- you're earning money. But if you like the idea of having predictable income for the next half-decade, then a 60-month CD could be a good bet.

So let's say you have $10,000 to put into a CD. At a 4.00% APY, you're looking at earning $2,166 in interest.

Meanwhile, if you open a 12-month CD with a 5.00% APY with $10,000, you'll make $500 your first year. But whether you'll manage to make another $1,666 over the next four years will depend on interest rates. Since we don't know how those will trend, you may not want to take the chance.

Is a 5-year CD right for you?

Five years is a long commitment in the world of CDs. So it's important to open one with confidence.

If you're saving for a goal that's about five years away, then a CD of this length makes sense. But if you're not sure what your savings timeline looks like, then five years is a long time to potentially cut off access to your money.

And if you're saving for a goal that's more than five years away, consider investing your money instead. A 4.00% APY pales in comparison to the stock market's average annual 10% return over the past 50 years.

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