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Is now the best time to lock in CD rates? Weigh in on the experts

CD rates today can be 5.00% or more if you’re willing to lock in your money for the entire term.

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after another Federal Reserve rate hike this month, Certificate of Deposit (CD) is one of the best ways to get a great return on your money. something Highest Earning CD Interest rates are 5% APY or higher.

But with the rate environment in flux, deciding when is the best time to lock in CD rates can be difficult. That’s because, unlike High Yield Savings Account, CDs require you to lock in your rate when you open your account. So the APY you agree to today is what you’ll earn over the entire CD term.

Consequently, timing is critical. If you open your CD too soon when rates rise, you could miss out on higher interest offers. But if you wait too long, rates may start to drop.

To help you navigate CD accounts today, we asked a few experts what they recommend for savers to choose the right time. Open a CD.

Start comparing your CD options with the best CD rates now.

Is now the best time to lock in CD rates?

Locking in a CD rate today can help you earn a lot of interest on your deposit. Say, for example, you put $5,000 into a one-year CD earning 5.05% APY. When the CD matures, you’ll have a total of about $5,252.50 in savings — a significant increase in exchange for locking your money in the account for a year.

But what really is the best time to do it? Here are a few things to consider first, according to experts.

Know the rate environment

In an ideal scenario, savers can lock in a CD rate for a long period When interest rates are highest. Then you’ll enjoy the security of knowing you’re earning that higher rate even as interest rates start to drop.

“The key is to lock in those high rates when they peak just before financial institutions cut rates,” says Paul Monax, CFP, founder of Agile Wealth. “But just like trying to time the stock market, it’s certainly difficult, practically impossible, for the average person to do, because even experts have trouble doing it.”

Even so, today’s high-yield CD rates are very competitive compared to other savings options and can earn many times more than regular CD accounts from major national banks.

The current average one-year CD rate is just 1.54% APY, according to the FDIC – while some online bank CDs today Earn 5.00% to 5.20% for a term of one year or less. Even if the rate increases slightly in the future, it’s still a much higher rate than you’ve had in the last few years.

Start saving now with the top CD rates available.

Consider your timeline

Beyond the overall rate environment, another important thing to think about, experts say, is your own timeline.

If you already have cash piled up over the next few years, it might make sense to lock in a higher rate now, says Daniel Frankel, CFP, founding principal of WealthCollab. “If we get a recession, rates could go down and you lose the opportunity to lock in these high rates.”

Losing a few extra percentage points on interest would be more damaging Selecting the wrong CD sound And there is a penalty fee to be paid for early access. Make sure you have a goal for your money so you can determine the right term length up front.

Fortunately, some of today’s top-grossing CDs are smaller than in the past; Many have a term of about six months to a year.

“CD rates are better than we’ve seen them in a long time,” said Andrea Oliver, CFP, owner and principal advisor at North Park Financial Planning. “If you’re sure you won’t need the money for the term of the CD, it might be worth using it if the rate is 0.5% higher than the savings rate.”

Bottom line

Today’s CD rates may give you a chance Increase your savings balance During the lifetime of your account. If you find a CD with a competitive rate and you already have a timeline in mind, it might be smart to lock in today’s competitive rate. While it’s unclear how much interest rates may rise in the future — if they do at all — CD rates are already high enough to help you get a significant raise, no matter how much you save.

Learn more about your CD account options here now.

MoneyWatch: Managing Your Money

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