Lately we’ve gotten a few questions about what to do with the cash now that the CDs from last year are maturing. As CD rates have gone down, people are wondering what the next best option is.
Here are some ideas. Please note, none of this may be interpreted as a recommendation specific to any one individual. Guidance that applies to your situation would have to be gained directly from your advisor.
A CD is a certificate of deposit that you buy from a bank. Despite rates moving lower, some CD’s still offer an attractive risk/reward profile.
A brokered CD is sold through a brokerage firm. These firms buy large quantities in bulk as a wholesaler, and then sell them to their brokerage account holders. Brokered CDs may potentially offer more attractive features, such as a higher yield or a longer investment horizon. However, you need to have a brokerage account in order to buy one, and there may be minimum purchase requirements.
A MYGA is a multi-year guaranteed annuity. It offers a fixed rate of return that is sometimes higher than what a CD for the same maturity would offer.
There are two ways that people typically buy Treasuries, new issues or sold in the secondary market. The new issues offer a limited selection and may not match up with what you want. The secondary market has a wide variety of bonds available.
Muni bonds offer the benefit of being tax exempt from Federal income tax and even state income tax for residents buying bonds from their home state.
Corporate bonds tend to be riskier, as you are holding debt of a company that is subject to capital market forces. However, for this reason the yields can be higher.
In summary, there are several options you should consider when reflecting upon what to do when your CDs mature. As always, this is a highly personal decision that should not be taken lightly. If any questions, please reach out.