10 Year CD Rates: Should You Commit?

A CD Ladder Might Be a Viable Alternative

September 2012

Whenever there's a period of high market volatility, it makes perfect sense that more people would consider long-term certificates of deposit, or CDs. After all, you've worked too hard to build your savings, only to watch your nest egg take a beating in a crazy Wall Street afternoon.

The Case for 10-Year CD Rates

It's no secret that 10-year CD rates are typically among the highest available, since you're agreeing to keep your money deposited for a longer time or face an early withdrawal penalty if you decide not to let your CD mature. And the certainty you get with longer-term CDs not only provides some peace of mind, but it can also allow you some freedom with your time. With funds growing away at 10-year-interest rates, you can focus on other things instead of watching over your money.

Still, a long-term commitment isn't for everyone, and it's important to approach the idea with an open mind.

The Risk with 10-Year CD Rates and a Different Path to Consider.

Regarding 10-year CD rates, we spoke to Eric Stiff, vice president of marketing for Members Credit Union in Winston-Salem, N.C. He said, "There's an opportunity risk in locking your money in for that long." He also pointed out that the opportunity risk is a bit greater when rates are lower because things are more likely to improve over the longer term.

In addition, there's the early withdrawal penalty to contend with should you find yourself needing to access those funds for an unforeseen expense.

So if the "set-and-forget" freedom of 10-year CD rates - not to mention the likelihood of a relatively great APY - just isn't making sense but you still want a longer-term savings solution, consider a CD ladder.

"Let's say, for instance, that you have $10,000 that you would like to save in a low-risk account, but still generate as much interest as possible," Stiff said. "Instead of opting for those 10-year CD rates, you might [deposit] $2,000 in a 5-year CD, which will still pay a relatively high rate; $2,000 in a 4-year CD, $2,000 in a 3-year CD; $2,000 in a 2-year CD; and $2,000 in a 1-year CD. That way, when the 1-year CD matures, you can either roll it in another 5-year CD, if that makes the most sense given rates at that time, or make an entirely different decision."

Ally Bank is Here to Help

The ladder approach may give you additional advantages when you choose Ally Bank Raise Your Rate CDs for the 2- and 4-year rungs of your ladder. With them, you get CDs that are backed by our Ten Day Best Rate Guarantee, and if our rate on these CDs rise during the term of your account, you'll have the option to raise your rate as well - once for a 2-year Raise Your Rate CD and twice for the 4-year account.

Ally Bank offers CDs for the other rungs of your ladder, too. They all come with some of the most competitive CD rates available in the country, backed by the same Ten Day Best Rate Guarantee.

Learn more at Allybank.com or speak to a customer care representative over the phone at 877-247-ALLY (2559), where live assistance is available 24/7.

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