The Federal Reserve has kept rates elevated over the past year to continue the fight against inflation. In turn, it’s more expensive to borrow money in today’s high-rate environment, as rates across mortgage loans, personal loans and other borrowing options are much higher than they were a few years ago. 

On a positive note, though, the rate environment has been a boon to savers, and certificate of deposit account (CD) holders in particular. A major advantage of CDs is that they allow you to lock in your interest rate over a set term. For example, while the average 5-year CD rate is 1.40% (as of July 15, 2024), some of the top CDs come with rates greater than 5% right now.

But while putting money in a CD can come with big benefits, you should make sure to have the best strategy in place to maximize your returns. 

Find out how the top CD accounts could help you reach your savings goals now.

These are the 5 best strategies for investing in CDs right now, experts say

These strategies can be helpful when opening a CD to get the best return on your investment, experts say.

Shop around for the best CD rates

To maximize your returns, experts say the first step is to shop around for CDs and compare rates from several financial institutions. For example, Steven Calio, CFP and CEO of financial planning firm CSG Financial, recommends comparing CD rates from banks and credit unions to find the best rates. 

“Online banks often provide competitive rates,” Calio says.

Explore some of the best CD rates available to you here.

Choose a CD terms based on your need for liquidity

In addition to comparing rates, make sure to choose a CD term that fits your overall financial plan. After all, the best strategy for investing in a CD varies based on your financial goals and liquidity needs, according to Calio. 

For example, if you’re saving up for a dream vacation that’s a year away, you may want to consider opening a 1-year CD.

Create a CD ladder

Another strategy experts recommend is building a CD ladder. With this strategy, you purchase CDs with both shorter and longer terms, spreading your money across the CD ladder so that your CD accounts mature at a staggered rate, giving you regular access to a portion of your funds.

One benefit of doing this is that it allows you to lock in multiple CD rates, but it also provides liquidity and flexibility for how money is used in the shorter-term CDs after they mature, says Jason Dall’Acqua, certified financial planner at Crest Wealth Advisors. 

Another benefit is that it can help you avoid potential early withdrawal penalties. 

“Laddering or investing in equal amounts of money into a series of longer maturities, like a 1-, 2- and 3- year CD can give you the flexibility to deal with a liquidity problem that might pop up without liquidating a CD with a penalty,” says Gregory Harmon, assistant professor of banking and finance at Case Western Reserve University.

That said, there are some possible drawbacks to consider. Calio says your initial returns with this strategy might be lower than investing all funds in a high-yield long-term CD. Plus, managing multiple CDs and reinvesting the proceeds requires more time and attention.

Purchase long-term CDs to lock in rates

While short-term CDs tend to have higher rates than long-term CDs in today’s economic environment, it may still make more sense to lock in a long-term rate right now.

Long-term CDs might offer more stability and better returns over time, says Calio. When choosing a CD term length, it can help to weigh the trade-off between immediate returns and long-term gains.

Ryan Cravitz, retirement income certified professional with Cravitz Financial & Insurance Solutions, also notes that locking in a long-term CD rate today could be a smart move. That’s because even if the Fed lowers rates soon, your higher CD rate would be locked in for the rest of your term.

“Back in 2000, for example, you could find CD rates over 5%,” says Cravitz. “Then, just a few years later, CD rates dropped considerably. Some CDs were only paying around 1%.”

Reinvest proceeds from matured CDs into new ones

Reinvesting your CD gains can help you take advantage of compound interest. Calio recommends reinvesting the proceeds from matured CDs into new ones to take advantage of [potential] rising interest rates.

The bottom line

Choosing the right depends on your unique financial circumstances and goals, says Calio. By understanding various strategies and evaluating your personal needs, though, you can optimize your CD investments in today’s rate environment. And, it’s important to also diversify your assets, experts say. While today’s higher CD rates may be attractive, they don’t compare to the average annual returns of the S&P 500 over the past, for example, which have exceeded 15% per year, Dall’Acua says.