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With the stock market slumpingoil prices rising and elevated interest rates unlikely to be reduced when the Federal Reserve meets again this March, it’s understandable if savers find themselves looking for ways to protect their principal and grow their interest right now. Despite interest rate reductions in 2024 and 2025, there are still some viable savings accounts worth considering that accomplish both goals. A certificate of deposit (CD) account is one.
CD interest rates remain competitive right now, with rates around 4% still common and easy to find, especially if savers elect for online banks versus their local banking branches. With a long-term CD, in particular, these savers can circumvent any interest rate drops in the months and years ahead while providing extended protection for their money against market volatility that’s especially pronounced right now. So, if you’re looking to park $10,000 right now, a 2-year CD, in particular, could be the place to keep it.
Before getting started, however, it helps to know the exact interest-earning potential of an account of this size and length. After all, you don’t want to lock your money away for 24 months without knowing the reward once the account has matured. So, how much interest can a $10,000 CD account earn over the next two years? That’s what we’ll calculate below.
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How much interest can a $10,000 CD account earn over the next 2 years?
To determine the exact interest-earning potential of a CD, savers will require three items: the length of the account (or term), the interest rate and the deposit amount. While early withdrawal penalties can impact earnings, the calculations below assume no fees have been levied against the account. Today’s readily available, 2-year CD rates were also utilized to crunch the returns:
- $10,000 2-year CD account at 3.85%: $784.82 upon maturity
- $10,000 2-year CD account at 3.95%: $805.60 upon maturity
- $10,000 2-year CD account at 4.05%: $826.40 upon maturity
So not only will savers fully protect their $10,000 principal (CD rates are fixed and the accounts are FDIC-insuredtoo) but they will also earn around $800 in interest once the account has hit its maturity date in 2028. For all of these reasons, then, this could be the viable savings vehicle to explore this March.
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Is CD laddering worth it this March?
Locking a five-figure amount of money into an account that you can’t touch for two full years may be profitable, but it won’t necessarily be easy. Fortunately, this isn’t the only way for potential CD account holders to take advantage of today’s elevated interest rate terrain.
With a CD laddering strategy, for example, savers may be able to maintain a baseline level of accessibility to their funds while still earning today’s high rates. With this approach, the $10,000 would be split into different CD accounts with different terms and maturity dates, ensuring that there will be a portion of the money available in the short-term while still allowing savers to benefit from the long-term options (albeit with an amount smaller than $10,000).
This approach will require more effort on the part of the saver and a bit more strategizing, but if the end result is still a sizable return without having to give up total access to your money for a multi-year period, it could be worth it.
The bottom line
A $10,000 2-year CD account can earn savers around $800 by March 2028, if they elect to open the account now. But if CD of this size and length is too hard to manage, a CD laddering strategy may also be valuable to explore. Just don’t let this point in time in the interest rate climate pass you by entirely without profiting from it. It was only the start of the decade when interest rates here were barely around 1%, so it makes sense to take advantage with a high-rate CD while you still can, especially before the next round of Fed rate cuts commence.