10 Year CD Rates: Should You Commit?

A CD Ladder Might Be a Viable Alternative

December 2014

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 on a crazy Wall Street afternoon.

The Case for 10-Year CD Rates.

It's no surprise 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 pay an early withdrawal penalty. And the certainty you get with longer-term CDs not only provides some peace of mind, but it also can allow you to focus on other things besides money management while your funds grow steadily at 10-year interest rates. Still, such a long-term commitment isn't for everyone.

A Different Path to Consider.

Regarding 10-year CD rates, Ally Bank 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" appeal of 10-year CDs doesn’t outweigh the potential for higher APYs for you, but you still want a longer-term solution, consider a CD ladder. A CD ladder is a system that diversifies your money across CDs with varying maturity dates. For example, you might put 20 percent of your funds in five different CDs, each of which would have a different term length. If you chose CDs with term lengths of 12 months, two years, three years, four years and five years, for example, once the 12-month CD matured, you could then renew it in a new five-year CD. Following this process every year would result in a CD maturing every year, allowing you to take advantage of potentially higher long-term rates.

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 these CDs, you have the option of a one-time rate increase if our Ally Bank 2-Year CD rate goes up; you have the option to increase your rate twice (two times) if our Ally Bank 4-Year CD rate goes up. Ally Bank offers CDs for the other rungs of your ladder, too. They all come with some of the most competitive CD rates in the country, backed by our Ten Day Best Rate Guarantee.

Learn more by visiting Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.

Ally Bank, Member FDIC

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