In addition to bolstering retirees' long-term financial security, certificates of deposit (CDs) also can be used to meet other financial goals in a variety of situations.
In essence, they can provide a secure place to "park" money that is earmarked for a specific purpose at a specific time—especially when you will be using the money relatively soon and need to avoid the short-term fluctuations of the stock market.
Similarly, CDs often make sense for funds that have been put aside for large life events such as a wedding, a vacation or an impending home purchase. For example, if you have a high school junior or senior, you may want to move a significant portion of their college savings out of mutual funds and into a CD. We talked to Carl Friedrich, managing principal of Friedrich Wealth Management in Syosset, New York about that subject. "With college," says Friedrich, "you know when you're going to need the money you're going to be able to nail it to the year. So I think college saving is very conducive to CD investing."
Some people also use them to impose a measure of self-discipline. Erin Baehr, president of Baehr Family Financial in Stroudsburg, Pennsylvania, told Ally Bank about a client of hers who had a lump sum of money he wanted to use to pay next year's state property taxes. "He wants to put that money away somewhere where he really can't get to it unless someone becomes sick or there's some other extreme circumstance." For this client, she says, a CD has the benefit of putting those designated savings "out of sight, out of mind" until they are needed.
The bottom line: "if you're starting from, 'I know when I need the money and I can't lose a dime,’ CDs keep coming out on top," says Carl Friedrich.
Ally Bank CDs offer a range of benefits. Find out which one works the best for both your savings goals and your long-term financial planning. Visit Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.
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