Is CD Investing in Sun City, AZ, Right for You?
Certificate of deposits, also known as CDs, can be a great way to invest money for the future. They are easy, safe options for those looking for a simple way to save. For instance, if you’re thinking about retiring soon, you can invest money now and have a guaranteed rate of return. CDs work by agreeing to deposit an amount of money now, and having that amount grow over time. This means that you simply invest, wait, and collect when your CD has matured. Easy, right?
However, you should be aware that there are strict limitations on when you can withdraw money; in fact, you can get dinged with a fee if you opt to take that money out sooner than you’ve agreed to. The length of time you must wait to withdraw the money you’ve invested depends greatly on your specific CDs terms, and can vary from a mere three months to several years. It’s up to you to decide what kind of timeline works best for you and your budget.
What are the benefits?
The biggest benefit of investing in CDs is security. Let’s say you plan on retiring within the next 15 years; you don’t want to risk losing a cent of your earnings. A CD is federally insured up to $250,000, so you can rest easy knowing your investment is safe and sound. If you‘d like to invest more than that, go for it, but know the FDIC won’t insure more than that amount. Alternatively, you can invest in several CDs of up to $250,000 or less so that you can guarantee your cash isn’t going anywhere. There’s also no minimum amount required to start.
More often than not, your CD will come with a fixed rate, which is great if you’re looking to be able to accurately estimate what your return will be. This can be very beneficial when planning for the future and can help while creating budgets.
If you’re thinking this seems similar to a savings account, you’re right. The key differences here are that you can’t withdraw money without a fee until the agreed-upon term has passed, and CDs typically have higher interest rates. This means that you’re “making” more money, and when you are able to withdraw from it, you have more to show for your initial investment.
Investing in CDs may not be as exciting as playing the stock market, but that’s their beauty: Stocks can be risky, but CDs are secure. You’re not going to win big, but you also won’t risk losing it all.
Are CDs a good fit for me?
As mentioned above, you aren’t going to get a huge payout for your investment. If you’re not as interested in guarantees as you are in hitting a jackpot (however unlikely that may be), then maybe investing in CDs isn’t right for you. You might prefer investing in stocks and following the highs and lows of the market.
And, sure, while the interest rates on CDs are generally higher than say a savings accounts, those higher rates come with longer terms (the amount of time it takes for your CD to mature). If you’ve got the time to wait for your money to grow, then great. But if you don’t, a CD may not be your best option.