What is the oldest CD available?

Most banks on our radar offer certificates of deposit (CDs) in a variety of standard terms, typically up to five-year CDs. But how do you set up a predictable stream of interest income for five years or more? Do long-term CDs exist?

The short answer is yes. You can find CDs with maturities longer than five years. But there’s more to the story, so here’s what’s available and what you should consider before you decide to deposit your money.

Some banks offer longer CDs.

Although five-year CDs are the industry standard for long-term CDs, some banks offer CDs with longer maturities. To mention a few that exist at the time of this writing (February 20, 2024):

• Marcus from Goldman Sachs offers a six-year high-yield CD with a minimum deposit of $500 and a 4% APY.
• Discover® Bank offers a 7-year CD with a minimum deposit of $2,500 and an APR of 3.80%. There is also a 10-year CD available at the same 3.80% APY.
• Vio Bank offers 7-year and 10-year maturity CDs, but both have a relatively low APY of 2.75% as of this writing. The minimum deposit amount is $500.

The point is that banks can and sometimes do offer CDs with maturities longer than five years.

Are long-term CDs a good idea?

Long-term CDs can be a smart way to secure predictable interest income for many years. They can be a smart retirement income tool, especially if CD interest rates are relatively high. But long-term CDs aren’t the best idea in all cases.

First of all, while long-term CDs do exist, they may not be the best place to invest your money for risk-free income if you’re looking to lock in an interest rate for the long term. For example, as I write this, the yield on 10-year Treasury bonds is about 4.28%, and you can buy up to 30-year Treasury bonds that pay a risk-free return.

Additionally, Treasury securities can be purchased relatively easily through brokerages that offer bond investments, or directly from the government through TreasuryDirect.gov if you want to lock in your income for 10 years or more. For short-term CDs, Treasury yields are often slightly higher than Treasury yields, but for long-term bond purposes, Treasury yields are often higher.

Additionally, if you want a long-term income stream, Treasury bonds have some key advantages over CDs. For example, CDs have an FDIC insurance limit of $250,000, while Treasury bonds are fully backed by the U.S. government. Additionally, income from Treasury securities is exempt from state income taxes, while income from CDs is taxed at both the federal and state levels.

And while it’s well-known that there are typically penalties for withdrawing CDs early, you may not know that many banks have stricter penalties for longer-term CDs. Plus, when interest rates are relatively high like they are now, it’s not uncommon to find much higher interest rates on short-term CDs.

conclusion

The bottom line is that depending on your situation, a long-term CD like the one discussed here may be right for you. But there may be better long-term income options, and if you’re not sure if you want to keep your money tied up, it’s worth considering creating a ladder of CDs of various maturities so you can access some of your money each year. Too often.

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