How to choose a CD sound according to experts

If you are looking for a low-risk investment with guaranteed returns, a Certificate of Deposit (CD) Could be a great option for you. CD is safeReliable and offers higher returns than traditional ones Savings Account (and even some high yield ones).

However, not all CDs are created equal. One key thing to consider before you open an account is CD sound, or the length of time you agree to keep your money in the account. Short-term CDs typically have maturities of three to six months and one year, while long-term CDs can be five years or longer.

It is important Choose the correct CD sound There are a few key details you can consider to help you make decisions — and to make sure you’re getting the most from your investment.

Check out today’s top CD rates to start exploring your options

How to choose a CD sound according to experts

Here’s what the pros recommend keeping in mind when choosing a CD sound.

Identify your savings goals

The first step in choosing the right CD term is to consider your savings goals. Do you need a certain amount of money by a certain date? Is that date in the near future or many years later? Knowing your savings goals will help you determine the CD term length you should choose.

For example, if you’re saving for a down payment on a house or wedding, a Short term CDs may be the right choice. On the other hand, if you are saving for retirement, a Long term CD Could be a good alternative.

“If a saver has a specific savings goal, they likely want to select a CD term that matches when the expenses will occur,” says Tim Melia, CFP, MBA, financial planner at Embolden Financial Planning. “If they have a goal in three months, they’ll want a three-month CD. Presumably, a saver doesn’t want a longer term than the target cost, because there might be a fee or penalty for selling the CD before it expires. The term.”

Check out the current CD offerings to find the one that’s right for you.

Consider the early withdrawal penalty

As Melia points out, your money can be withdrawn from a CD before the expiration date penaltywhich may disallow any interest earned.

“Your CD terms should match or at least not exceed your time limit for funding needs,” says Joe Marques, CFP, wealth advisor and co-CEO of Bolin Creek Wealth Advisors. “Yes, you can always break the CD by paying the penalty, but the penalty will eat up the interest you earn and may even eat away some of your CD principal.”

That said, Marques added, “If you have some flexibility about how you’ll need the money, extending the term can be helpful to see how your rate increases. So if a six-month CD is yielding 4.5% and you extend the term to a year If you can get 5%, and you won’t need the money for a year, it’s worth extending your tenure.”

Start your CD search here to find out how much you can earn.

Compare CD rates

Generally, long-term CDs offer higher interest rates than short-term CDs. However, rates can vary across banks and credit unions, so take the time to compare.

“Just because one term is longer than another doesn’t mean it will pay a higher interest rate or vice versa,” says Greg Goff, CFP, founder and financial planner at Sound Wealth Management. “You may find that you can earn a higher interest rate in the short term.”

In fact, many of today’s best rates are offered on one-year CD terms While this isn’t always the case, choosing a short term right now can offer big benefits. You can easily compare CD rates here.

Bottom line

In an investment marketplace that offers countless options and account types, choosing the right CD term can seem overwhelming. But it doesn’t have to be. By carefully considering your financial goals, being mindful or comparing early withdrawal penalties and current ones CD rate, you can choose the right word for you. When in doubt, meeting with a financial advisor online or in person can help you weigh your options.