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A certificate of deposit (CD) account. has become a popular investment choice in recent years as interest rates have risen due to the Federal Reserve’s anti-inflation policy. Many high-yield CDs offer rates as high as 5.00%, providing an unprecedented opportunity to earn low ROI with minimal risk.
For many investors who opened their accounts at record highs CD rates in the post-pandemic era, he CD maturity date it may be fast approaching. His level is just permanent — and the money is just locked away — until that date.
If you are one of the investors and the CD is maturing in December, you have to make some difficult choices about what to do with the invested money. However, you have a variety of options, so be aware of what the experts recommend.
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4 moves to make if the CD matures this December
Here are four moves to consider if CD is set to mature this December:
Check for automatic updates
Whoever it is term CD already done in December has been a critical step to take directly. “Check your current CD for any auto-renewal provisions,” advises Chad Gammon, certified financial planner and owner of Custom Fit Financial. “You don’t want to be surprised to find out you’re locked into another term by accident.”
If your CD term is up, you usually have a short period time of grace to act before the bank can renew the certificate in the present CD rates. The rate may be also below the paid results.
Unfortunately, if you do not transfer money and the bank puts you into a new CD with a low rate, you will be stuck for the term of the CD if you want to early withdrawal penalty.
You don’t want to lose the opportunity to shop around for a CD interest rates are good — or, worse, take the time to research it the best type of CD to choose now only to find your option has been taken because you have reinvested it and locked it up.
See how much you can earn with one of today’s top CD rates.
Consider your financial goals
As long as you’ve turned off auto-renewal, you’ll have a choice of what to do with your money when the CD’s maturity date arrives. To make that decision, take some time to think about your goals.
“What you should do if your CD matures in December depends on your financial situation,” says Domenick D’Andrea, AIF, CRC, CPFA, financial advisor, and Co-Founder of DanDarah Wealth Management.
For some people, it is better to use some money for immediate needs. “I recommend using some funds instead of debt during the holidays,” D’Andrea suggested — and Gammon agreed. “If you need funds from a CD in the next few months, such as to pay for holiday shopping, it’s a good idea to use the CD,” Gammon said.
If you don’t plan to spend immediately but need money quickly, keeping it accessible while maximizing your ROI is a top priority. “If you need access to this money in the short term, consider a more liquid account that still offers competitive rates compared to standard savings accounts,” said George McFarlane, president of 7 Waters Advisors. “A high savings account or a money market account can be a good option in this situation.
Of course, even if it’s better than borrowing, spending money from matured CDs has an opportunity cost, and it’s not for everyone. “If you have a CD maturing in December, you will likely want to reinvest those funds to maintain purchasing power,” advises Jonathan Ernest, professor of Economics at Case Western Reserve University.
Research CD deals today
If you decide to reinvest, your risk tolerance, investment timeline and available alternatives will dictate where to put your money. If you need the money in five years or less, reinvesting CDs may be the best course of action — but you don’t want to just accept whatever rate your bank offers.
“Find higher rates with longer terms, as this can help you secure better returns even when interest rates fall,” McFarlane suggests. “This may include searching online for rates that are higher than what your local bank is offering.”
Gammon also emphasized the importance of shopping and advised that there are some good buying opportunities this month. “Research the interest rate not only from the bank of the current CD but also from other financial institutions,” he said. “There will probably be end-of-year promotions on CDs from some institutions.”
Even with that promotion, the current results can be a disappointment. “The Fed has lowered rates by 75 basis points, so you can’t find a higher rate than maturing CDs,” D’Andrea warned.
Like McFarlane, D’Andrea suggests that small banks or online banking can provide better rates. They also have some advice on which CD terms to choose. “If you’re going to lock those funds into a new CD, I’d suggest you pick the longest term you’re comfortable with because I’m sure you’ll see lower rates over the next few years. It can match current rates again.”
Ernest also emphasized that, while rates aren’t at their post-pandemic peak, they’re still high by historical standards — especially if you find the best deals.
Explore alternative investment options
Finally, you can also consider other investments beyond CDs.
“If you have a CD maturing in December, before reinvesting, take a moment to reassess what your goals are for those dollars. Ask yourself if these dollars should still be invested conservatively or if your time horizon or risk tolerance has changed,” Jeff DeLarme, CFA, CFP, and President of DeLarme Wealth Management, Inc.
If you can take more risk or have a longer time line, there are many other investments that can yield better returns than CDs.
“You might explore alternatives to CDs, such as I Bonds or fixed annuities,” McFarlane suggested. “These options often provide slightly higher rates and greater liquidity. For example, fixed annuities typically allow you to withdraw 5 to 10% of your balance each year without penalty. They also offer longer terms, so you can lock in higher rates for a longer time.”
DeLarme also points out that the alternative may have tax benefits. “CDs are usually taxable, while Treasury Bills can earn interest that is exempt from state income tax,” he said. “When you consider the potential tax savings, Treasury bills can be a better vehicle and can be a more liquid investment than some bank CDs.”
Of course, the stock market is another option as well. “If you have some appetite for risk, you can consider investing in equity and hope that the Santa Claus Rally boosts stock prices in the last week of the year,” Ernest suggested.
The good news is, each of these options can make good sense in the right circumstances. Just take the time to weigh the pros and cons to decide what’s best — and don’t let CDs auto-update because otherwise you’ll lose the ability to make choices.
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