20 year CD Rates yielding above 4.0% APY. Would you invest?

December 1, 2010 2 Comments »

If you’ve been in the market for a bank CD for the past year or so then you’ve undoubtedly been frustrated by the interest rates banking institutions are currently offering. Credit unions and online banks – institutions generally touting the best rates on deposits are advertising APYs that may not even beat inflation in the next 6 months – and the CD rates offered by the big banks are practically non-existant. Given these market conditions for savers we realize there could be a temptation to go long…real long. TD Ameritrade is offering savers a FDIC insured 20 year CD yielding a whopping 4.0% APY with a minimum deposit of $100,000 required. As tempting as a 4% CD can seem right now – you still may want to reconsider.

Things to Consider Before Going Long on a Bank CD:

1) Interest rates are about as low as they’ll go…hopefully.

2) This is precisely the opposite of what savers should strive to do – which would be to go long at the top of a rate cycle, locking in the best available rates before they come down.

3) Many economists expect the Federal Reserve to stop driving interest rates to these record lows sometime next year. If you buy into this assessment, the appropriate thing to do would be to keep your money in liquid, FDIC insured money market accounts or interest checking accounts until savings rate begin to rise.

4) Next year CD rates should begin to slowly climb back to normal/rational, market-based levels.

So – If after taking these suggestions into consideration and you still want to lock in a 20 year CD, you may want to check out the 20 year CD’s TD Ameritrade has available.

Quick Facts on TD Ameritrade’s 20 year CDs:

- 20 year CD rate yielding 4.04% APY with a minimum deposit of $100,000 required.

- FDIC insured up to $250,000

- Interest compounded semi-annually

- CD’s offered by TD Ameritrade are called brokered CD’s. Learn more here.

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  • Mike

    It would entirely depend on how old you are. If you’re 90 i say go for it!

  • 1-year CDs

    The other thing to consider is what are the average rates for CDs. If the 4% is in-line with average rates it might not be a bad idea. Saves you from having to chase rates daily, monthly, semi-annually, or whatever time frame you tend to keep your CDs in.

    Personally, I would wait. I think the average for CD rates hovers in the 4.50% to 5.00% range. Now, one thing that might move me along is if their early withdrawal penalty wasn’t that high. But you mentioned this is a brokered CD which probably means if I want out, I would have to sell it. That could mean a big loss in the future.

    cd :O)