Our rate analysis page provides some insight into where we think rates will go. While it is impossible for anyone to predict too far into the future, savers should be cognizant of the economic environment before locking up money for a five year time-period.
But if inflation rises the next year to 2.5% and stays there for the next four years, then the CD in real terms is losing money every year: For example, if a depositor opened a five year CD in year 1 with a yield of 2.05% APY and inflation at 1.5%, then the Value of the certificate of deposit over its five years. If the CD is opened in a low rate environment, and rates and inflation subsequently rise, then inflation will erode the The principle threat to a a five year CD is inflation. If your deposit is over theįDIC limit then you may not receive the uninsured money in case of a bank failure. Like every other CD term, five year CDs from FDIC insured banks are protected up to FDIC limits (generally $250,000 per account holder per bank). In rising rate environments a five-year CD may not be a good investment. Therefore, the temptation for those looking for yield is to open one, deposit money, and forget about it for five years. The 5-year CD is therefore often the highest offer at your local bank. While banks may offer six-year, seven-year, or even 10-year CDs, the five-year is the longest of the most commonly offered terms. Five-year CDs are the big kahuna of the CD world.
