i wouldn’t lock any cd in at 5 years right now. max would be 3 year. interest rates have nowhere to go but up from here. the time to lock in longer term cd rates is when interest rates are high.

CDs can play a valuable role in your cash portfolio whether that portfolio is for emergencies or for stability in reaching longer-term goals.

Another example of where CDs are a great fit is with retirees who follow the ‘worst case’ allocation method. This means they ladder CD maturities out over 3 to 5 years so that when shite hits the fan they have time to recover without sweating the details. Imagine if you were a retiree with a 4 year CD ladder plus your stocks, bonds, etc. I think you’d probably not sweat the details and be better able to maintain your long-term portfolio discipline.

Using this method, I literally have an extra $20,000/yr in interest income for the past 8 years. That’s $160,000 just b/c I used the DVD Method, and it’ll be even more money down the road as more cash is built up.

It makes absolute sense, as every year you don’t spend your money and keep it in a 1-1.5% savings account or 1 yr CD, you are losing 2.5-3% of your money guaranteed.

FS

Last month I topped off the Roth/IRA’s and the kids college funds. This still left a nice 5 digit chunk to pay down the mortgage.

Once you have established a liquid emergency fund and have built a nice triple digit taxable investment account is there any sense in playing the CD game at 2%?

Even though we’ve been experiencing deflation over the last several months, it cannot last. Having thousands tied up in CD’s for months will be like throwing money away.