Is investing in a CD right for me?

While CDs may not be suitable for every investor, they hold particular appeal for risk-averse individuals seeking stable investments. For those with short-term financial goals or approaching retirement, CDs offer a dependable method to steadily accumulate funds until they are required, whether for retirement planning or significant purchases.

How is CD interest taxed?

Interest earned from CDs is classified as taxable income and must be reported on Form 1099-INT if it exceeds $10 annually. Furthermore, early withdrawals from CDs attract penalties, which must also be reported on your tax return.

How does a CD differ from a savings account?

Certificates of deposit secure an interest rate for a predetermined period and limit access to funds while savings accounts offer greater flexibility despite potential interest rate changes. Nonetheless, maintaining both a savings account and a CD can be advantageous. Surplus funds can be allocated to a CD to accrue higher interest over a set term or earmarked for specific future expenses.

How much does a $10,000 CD make in a year?

Investing $10,000 in a 2-year CD with a 2.50% APY would generate $250 in interest in the first year alone, leading to a total of $10,506 at maturity after the second year. However, withdrawing funds before maturity may result in an early withdrawal penalty, potentially causing you to forfeit part or all of the earned interest and even a portion of the principal.

Are CDs FDIC-insured?

Yes, CDs are insured by the FDIC. This federal agency provides insurance coverage for savings accounts held by its members, which includes money market accounts and CDs, up to $250,000 per customer per bank. This insurance ensures the safety of your funds in case of a bank failure. If you choose to invest in a CD through a credit union, make sure it is insured by the NCUA, which operates similarly to the FDIC but specifically insures credit unions.

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CD RATES TODAY, DECEMBER 16, 2024; SHORT TERM LENGTHS OVER 4.5%

CD rates today, December 16, 2024; short term lengths over 4.5%

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