Is investing in a CD right for me?

While certificates of deposit may not be appropriate for all investors, they hold particular appeal for risk-averse individuals seeking stable investments. For those with short-term financial goals or nearing retirement, CDs offer a dependable method to steadily accumulate funds until they are needed, 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. Moreover, early withdrawals from CDs result in penalties, which are also reported on your tax return.

How does a CD differ from a savings account?

CDs offer a fixed interest rate for a specific duration and limit access to funds while savings accounts offer greater flexibility despite potential interest rate fluctuations. Nonetheless, maintaining both a savings account and a CD can be advantageous. Surplus funds can be allocated to a CD to gain higher interest over a designated period or earmarked for specific future purchases.

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

If you invest $10,000 in a 2-year CD with a 2.50% APY, you will earn $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 incurs an early withdrawal penalty, potentially resulting in forfeiting part or all of the earned interest and even a portion of the principal.

Are CDs FDIC-insured?

Yes, CDs are covered by the FDIC. This federal agency insures savings accounts held by its members, including money market accounts (MMAs) and CDs, up to $250,000 per customer per bank. This coverage ensures the safety of your funds in the rare event of a bank failure. If you choose to invest in a CD through a credit union, ensure it is covered by the NCUA, which operates similarly to the FDIC but specifically insures credit unions.

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CD RATES TODAY, DECEMBER 9, 2024

CD rates today, December 10, 2024

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