Frequently Asked Questions About Financial Investments
What Is a Certificate of Deposit?
Certificates of deposit (CDs) are a safe and stable way to invest your money. Issued by either the bank or a brokerage, certificates of deposit let your money compound over time with a fixed interest rate. While bank CDs can’t be accessed before their maturity date, brokered CDs can – on the requirement that you then sell them after.
Why Do Certificates of Deposit Tend to Offer Better Interest Rates Than Money Market Accounts?
CDs and money market accounts (MMAs) both have the same end goal, which is to save and stack money over time. Both are taxable, protected by the Federal Deposit Insurance Corporation (FDIC), and require an initial deposit of at least $1000. There are some key differences that divide the two. MMAs feature a tiered interest rate, while the interest rate of CDs remains fixed. Despite being fixed, the interest rates on a CD are typically higher than what you’d find in an MMA. The balance requirements of CDs are higher, too, which is why you’ll find better interest rates.
How Do Annuities Work?
How annuities work is very similar to how CDs function. Annuities are insurance contracts issued by financial agencies that pay out invested funds towards a fixed income for the future. The main difference between CDs and annuities is that CDs pay out a lump sum on a fixed date, while annuities pay out a little at a time, making it more ideal for retirement. Ultimately, it’s up to you to weigh the annuities pros and cons. If you’re unsure how to invest your money, we’ll break down the details so you can make a decision.
What Are Structured Certificates of Deposit?
Structured certificates of deposit (SCDs) are similar to traditional CDs with a few exceptions. While standard certificates of deposit occasionally pay a fixed interest rate, structured certificates of deposit make an additional payment on their maturity date. They can also make occasional interest payments based on underlying assets, currency exchange rates, or an index. Since they’re customizable, SCDs can cater to a specific objective rather than simply accruing money over time.
How Does a Certificate of Deposit CD Work?
A certificate of deposit works by investing a lump sum of money into a closed account for a period of time with a fixed interest rate.
How Long Do You Have to Keep Your Money in a Certificate of Deposit?
Depending on the bank or brokerage, you’ll be expected to lock in a certificate of deposit for one to five years. At Sun Cities Financial Group, we can help you determine yours.
How Much Tax Do You Have to Pay on CD Interest?
There is no specific certificate of the deposit tax rate. Variables depend on your income level and the items on your return. It’s not always clear-cut, but at Sun Cities Financial Group, we’re here to help.
How Safe Are Certificates of Deposit?
Certificates of Deposit are one of the safest ways you can invest your money. Because they’re secured by the Federal Deposit Insurance Corporation (FDIC), even in the event of a bank failure, the federal government will protect your investment.
Get Started With Sun Cities Financial Group
Do you have more questions, or are you interested in opening a certificate of deposit? Our friendly and knowledgeable team would love to help. Contact us today for a financially free future tomorrow.