People who are retired, or close to retirement, may also benefit from long-term CDs at higher rates because they often want two years of living expenses safely secured, said Pam Kreuger, founder of Wealthramp, a service that matches customers. Fee-only financial advisors. Ridiculous interest rates in recent years have penalized retirees, she said, so high bond rates of 3 to 5 percent offer welcome relief: “We’re in this golden moment.”
But given concerns about the economy and uncertainty about whether the Fed will continue to raise interest rates, it is unclear how long banks will pay higher interest rates. One way to deal with the ambiguous outlook, Ms. Krueger said, is to create a “CD ladder,” where you divide your savings among several CDs of different maturities. The approach aims to maximize the interest earned while allowing for periodic availability of funds.
For example, if you have $20,000, you can open four CD accounts, each with a deposit of $5,000, with terms of three, six, nine, and 12 months. When the three-month account falls due, you can reinvest the money into another 12-month CD (or spend it, if you need the cash). You can set up a ladder yourself or have a brokerage do it for you.
Here are some questions and answers:
How can I make sure my savings are covered by the Federal Deposit Insurance?
Given the recent banking turmoil, savers are especially concerned with making sure their money is protected. the Federal Deposit Insurance Corporation It generally protects up to $250,000 per depositor, per insured bank. If you share an account with someone else, you will each get $250,000 of coverage, for a total of $500,000. (The federal government chose to insure all deposits — even those over the maximum insured — in the two banks that failed in March. But there is no guarantee that the government will do so in the future.)
The FDIC also insures funds by type of account ownership, so it’s possible to get more than $250,000 in coverage per depositor in the same bank, depending on how the money is held. A married couple, for example, could have a joint savings account with $500,000 in it and two separate accounts in their own names with $250,000 each, insured for a total of $1 million, according to the FDIC’s online insurance tool.