Many savers clamored to buy CDs this year. For much of 2024, it was possible to lock in a CD rate of 5%, or even a little more. That’s a pretty great deal for a risk-free investment (provided your bank is FDIC-insured and your deposit isn’t above $250,000).
But at this point, the days of 5% CDs are pretty much gone. Savings account and CD rates have fallen in the wake of the Federal Reserve’s large cut to its benchmark interest rate. And since the Fed isn’t close to being done with rate cuts, savings account and CD rates are likely to keep falling — so much so that by this time next year, a CD may not even be worth it.
Why CDs won’t be as valuable in a year from now
Without a crystal ball, it’s impossible to predict what CD rates will look like in a year from now. But if the Fed keeps cutting the federal funds rate, which it’s expected to do, there’s a good chance CDs will fall well below the 4% mark, and possibly even below 3%, by the fall of 2025.
It’s one thing to open a CD at 5%, or close to it. It’s another thing to accept a 2.75% return. So if you’re interested in opening a CD, don’t wait around.
Our Picks for the Best High-Yield Savings Accounts of 2024
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American Express® High Yield Savings  APY 4.10% Rate info Min. to earn $0 Member FDIC. |
APY 4.10% Rate info |
Min. to earn $0 |
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Capital One 360 Performance Savings  APY 4.10% Rate info Min. to earn $0 Member FDIC. |
APY 4.10% Rate info |
Min. to earn $0 |
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CIT Platinum Savings  APY 4.70% APY for balances of $5,000 or more Rate info Min. to earn $100 to open account, $5,000 for max APY Member FDIC. |
APY 4.70% APY for balances of $5,000 or more Rate info |
Min. to earn $100 to open account, $5,000 for max APY |
If you have the money now, consider shopping around for a CD and open one while rates are still strong. You can check out this list of the best CD rates today to earn a great return on your money while you still can.
A smarter move for when CD rates fall even more
You may not love the idea of opening a CD when rates are much lower. But don’t despair — even if CDs aren’t worth opening in a year from now, the stock market will absolutely be worth investing in.
Over the past 50 years, the S&P 500’s average annual return has been about 10%. This accounts for years when the market gained a lot of value, and also, during years when it did poorly. If a CD isn’t appealing to you next fall, you may want to open a brokerage account and put your money to work there instead.
You may want to forgo a CD now and invest your money right away. If you put $8,000 into a stock portfolio that pays you 10% a year, in 20 years, it’ll be worth about $54,000. But if you wait even one year to invest that money, assuming the same return, you’re looking at $49,000 instead.
Even if you were to put $8,000 into a CD paying 4.5% today, in 12 months, you’re looking at $360 in interest. That’s not enough to make up for the $5,000 you might lose out on by waiting a year to invest your money in the stock market.
It’s hard to know what CD rates will look like at this time next year. But it’s more than fair to say they’ll most likely be lower. It’s also more than reasonable to say that over time, you’re likely to do worlds better with a stock portfolio than CDs. So even though CD rates are still pretty strong, you may want to choose stocks this fall instead.
