Why you should open a long-term CD after this week's Fed meeting

By opening a long-term CD now, savers can earn elevated returns for months and years to come. / Credit: Getty Images/iStockphoto

When pursuing select financial products and services, getting the timing right is critical.

Borrowers who didn’t lock in record-low rates during the height of the pandemic, for example, are now paying exponentially more to borrow money than they would have in 2020 and 2021. On the other hand, savers who saw negligible returns on their money during those years can now earn many times those rates with certain accounts. Both high-yield savings and certificates of deposit (CD) accounts are now offering savers an opportunity to earn 5% or more in interest.

And CDs, in particular, are especially attractive now considering that the rates these accounts come with are locked – meaning that even if the overall rate climate changes in the months and years to come, savers will still earn that elevated rate until the account matures. Understanding this, then, and with the prospect for rates to stay higher for longer after this week’s Federal Reserve meeting, there’s a compelling case to be made for opening a long-term CD. Below, we’ll break down three reasons why you should open one of these accounts after this week’s Fed meeting.

See how much more interest you could be earning with a long-term CD here now.

Why you should open a long-term CD after this week’s Fed meeting

Here are three big reasons why you should open a long-term CD following this week’s Fed meeting:

Rates may rise slightly

The Federal Reserve doesn’t need to formally raise rates for savers to see a slight bump in what lenders offer with long-term CDs. Even a hint at rate hikes to come, or an implication that higher rates will hang around a bit longer, could result in a slight increase in CD interest rates. While that may not result in dramatically more earnings, over time, the difference in a quarter of a point will add up, particularly for long-term CDs which have more time to earn that rate (12 months or longer) versus short-term CDs in which a slight rate difference will be negligible.

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Rates are already elevated

Even if rates stay exactly where they are on Thursday morning, it still makes sense to open one of these accounts now. You can earn 4% or 5% or more on long-term CDs currently, resulting in hundreds and possibly thousands of dollars earned, depending on the term length and the amount deposited when opening an account. Compared to the minimal 0.46% rate the average savings account comes with currently — and the variable nature of high-yield savings accounts, even at today’s higher rates — long-term CDs are arguably the best option to pursue right now.

You’ll have long-term protection

No one knows with certainty where inflation and interest rates are heading right now. But despite optimism that both were heading downward at the end of 2023, that hasn’t been the case in the first months of 2024. So, while long-term protection is beneficial in any economy, it’s especially important to secure right now.

Long-term CDs can offer just that. Granted, if rates rise post-CD opening, you won’t be able to take advantage (unless you ladder multiple accounts to expire at different times). But that’s less of a concern than losing out on the opportunity to rake in big returns – even when rates are inevitably reduced at some point in the future. A long-term CD removes that concern by offering high rates throughout the CD term, despite any economic challenges during that period.

The bottom line

While much of the last two years have been ideal times to open a long-term CD, the window of opportunity remains open. And with the next Fed meeting already underway, now is a great time to get started. That’s because rates on these account types may rise slightly again this week but, even if they don’t, they’re already elevated. Plus, they come with security by not falling over time, letting savers accurately predict exactly how much they will earn long-term. This combination of higher rates and long-term protection is worth pursuing now, particularly in the face of continued uncertainty regarding inflation, interest and other economic concerns.