CD Calculator

What is a CD?

A Certificate of Deposit is a savings product that holds a fixed amount of money for a fixed period of time (the term) and pays a fixed interest rate. CDs typically offer higher rates than savings accounts in exchange for locking up your money.

CD Terms and Rates

• Short-term (3-12 months): More flexibility, often lower rates
• Medium-term (1-3 years): Balance of rate and flexibility
• Long-term (3-5+ years): Highest rates, longest commitment

CD Ladder Strategy

A CD ladder involves splitting your investment across CDs with different maturity dates. This provides regular access to some funds while still earning higher long-term rates.

Example: $25,000 split into 5 CDs:

• $5,000 in 3-month CD
• $5,000 in 6-month CD
• $5,000 in 12-month CD
• $5,000 in 24-month CD
• $5,000 in 36-month CD

Early Withdrawal Penalties

• 3-12 month CDs: Usually 3 months interest
• 12-24 month CDs: Usually 6 months interest
• 36+ month CDs: Often 12 months interest
• Some no-penalty CDs exist but offer lower rates

CD vs High-Yield Savings

• CDs: Higher rates, locked term, penalty for early withdrawal
• HYSA: Slightly lower rates, full liquidity, no penalties
• Choose CDs when you wont need the money during the term

Tax Considerations

• Interest is taxed as ordinary income
• Interest is taxable in the year earned, even if CD hasnt matured
• Consider holding CDs in tax-advantaged accounts (IRA CD)

When CDs Make Sense

• You have a known future expense (car, vacation, down payment)
• Interest rates are high and may decline
• You want guaranteed, risk-free returns
• Emergency fund is already established