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Is now the best time to lock in a long-term CD?
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Over the last few months, all eyes have been on the Federal Reserve in hopes that a rate cut will occur, alleviating some of the high costs of borrowing that Americans are facing in today’s elevated rate environment. But while inflation is cooling, at a rate of 3.3%, the inflation rate still hasn’t reached the 2% rate targeted by the Fed — so the Fed has kept rates paused at a 23-year high over the last several months. That said, many experts forecast that at least one rate cut could occur in the coming months, making it more affordable to borrow money for a home, a car or any other purpose.
But the downside to the potential rate cuts is that when the Fed drops interest rates, the interest rates being offered on deposit accounts, like high-yield savings accounts and certificates of deposit (CDs), also decline in tandem. And, lower rates on deposit accounts mean less earning potential for savers. So if you want to take advantage of today’s high APYs and be protected against the Fed’s potential rate cuts, now might be the time to lock in a rate on a CD account.
There are lots of CD terms to choose from, though, so does it make sense to lock in a rate on a long-term CD in particular right now?
Compare today’s top rates on both short- and long-term CD accounts here.
Is now the best time to lock in a long-term CD? Experts weigh in
While it depends on your goals, financial needs and other factors, this could be the right time to lock in a long-term CD rate, experts say. Many short-term CDs currently offer higher interest rates than long-term CDs, but longer-term CDs could pay more in the long run — especially if rates drop soon.
After all, a long-term CD would lock in the rate for a longer period of time, so if rates were to decline, you’d continue earning at that same high rate until your CD account hit maturity.
That’s part of why locking in today’s high long-term CD rates is a smart move now, Armine Alajian, CPA, a tax consultant and founder of the Alajian Group, says.
“It’s a good time to open a CD right now rather than waiting,” Alajian says. “The Fed has been steadily raising interest rates over the last couple of years, but that might change during the latter half of 2024.”
By getting a good rate on a long-term CD right now, your rate stays the same for the duration of your CD term. So, chances are the rate you get now would be a vast improvement over the rates that would be offered after the Fed’s expected rate cut later this year.
But waiting to see what could happen with the overall rate environment could be a riskier bet. After all, there’s a chance that if you wait, you’ll open a long-term CD at a time when rates are lower than they are today, lessening your earning potential.
“With a CD, your money is locked into the account for a fixed term, and your interest rate is locked in as well,” Alajian says. “That could be a better bet for those hoping to cash in on our current high interest rates.”
And, the types of interest rates being offered on long-term CDs right now are unusual — and are higher than we’ve seen in decades. In turn, lower-risk investments like CDs might be worth considering, even though they come with their downsides — like early withdrawal penalties that can eat into your earnings if you need to access your money before the CD’s maturity date.
Find out how the right long-term CD could help you meet your money goals.
The bottom line
The prospect of locking in a long-term CD rate in today’s high-rate environment is appealing. However, it’s crucial to consider your personal financial situation and goals before making a decision. Long-term CDs offer stability and potentially higher returns over time, but they also come with less flexibility compared to other savings options. So, be sure to carefully weigh the trade-offs between the security of a fixed rate and the potential need for liquidity in the future.
And, it’s important to remember that ultimately, diversification is a key principle in ensuring that your finances and investments are working hard for you. As such, it makes sense to consider incorporating long-term CDs as part of a broader savings and investment strategy rather than putting all your funds into a single account. That way, you can position yourself to benefit from today’s high long-term CD rates while maintaining the flexibility to adapt to future economic changes.
On a rainy day in Paris, Pharrell Williams was at the headquarters of Louis Vuitton living the dream, at an office he prefers to call “a dream space.”
Last February, Williams was appointed the Men’s Creative Director. He oversees a staff of 200, and has already launched four new collections. His most recent, at UNESCO, paid tribute to the variety of the human race.
Giovanni Giannoni/WWD via Getty Images
Asked what is most satisfying watching his designs come down the runway, Williams said, “You’re gonna hate this answer: All of it!” he laughed. “Come on, man. It’s a dream!”
For more than three decades he’s been helping to make some of pop music’s biggest hits, from Nelly’s “Hot in Herre” to Gwen Stefani’s “Hollaback Girl,” while helping to bridge the gap between pop culture and high fashion.
He says the runway is just another way for him to show people who he is: “I always want to evoke a sense of joy, ’cause I feel like the world, there’s a deficit of joy.”
Sanneh asked, “But I imagine you do still have to pay attention to, ‘Are people buying these clothes that I made?'”
“Sure; that’s when you start questioning the success,” Williams said. “But like, man, you gotta enjoy it. If you enjoy it, nine times out of ten, somebody else gonna enjoy it.”
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Now there’s something new to enjoy: “Piece by Piece,” an animated Lego movie about Williams’ life, directed by the award-winning documentarian Morgan Neville. Last month, at the Toronto Film Festival, Williams said he still can’t believe he got to make this film. “I’m from a marginalized community where we often hear the word ‘no’ all the time,” he said. “For whatever reason, [for ‘Piece by Piece’], we got a lot of yeses.”
“This seems like one of your superpowers is getting people to say ‘yes’ to things they might otherwise say ‘no’ to,” said Sanneh.
“It wasn’t that hard; it’s just harder for people who look like me,” Williams replied. “But when we tell it in Lego, now it’s universal. Replace Black with LGBTQIA, or Indian, or Asian, or short, or plus size, or anything. LEGO is the great equalizer.”
To watch a trailer for “Piece by Piece,” click on the video player below:
As a boy growing up in a Virginia Beach apartment complex, Williams, a self-described misfit, saw and heard the world differently than most people, through a condition called synesthesia, by which he “sees” the colors of sound: “For me, sight and sound are still connected, so they send ghost images to each other. It’s a condition, but also at the same time it’s a gift, because I don’t know how I would make music if I couldn’t see it. That’s the way that I conceptualize it.”
With his childhood friend Chad Hugo, he formed a duo called The Neptunes. They were discovered by the music producer Teddy Riley, who saw them perform at a high school talent show. In 1992, around the time of his 19th birthday, Williams helped Riley write a hit single called “Rump Shaker,” recorded by the hip-hop group Wreckx-N-Effect.
Williams said, “If it wasn’t for Teddy Riley, I wouldn’t be sitting here right now. ‘Cause I was in Virginia Beach, Virginia, where there was no music studio or music industry or anything like that.”
The Neptunes produced a string of hits, and then Williams branched out on his own, becoming a real pop star. His voice was everywhere, although Williams himself had mixed feelings about it: “I had a song called ‘Beautiful’ with Snoop, right? Girls heard me singing that; I heard Mickey Mouse! I swear to you, when you just get a moment and you just listen, you’ll never be able to un-hear it again. But that’s what I hear.”
“Sexy Mickey Mouse?” asked Sanneh.
“No, not sexy, just Mickey Mouse. It was wild for me.”
By the early 2000s, Williams says he felt lost: “I had moved away from being a student, and things became too formulaic. And that was troubling to my spirit, and I could no longer feel what I was doing.”
He rebounded by being a bit more open to new ideas – working with Daft Punk on “Get Lucky,” and Robin Thicke on “Blurred Lines.”
“Get Lucky” by Daft Punk featuring Pharrell Williams and Nile Rodgers:
The producers of “Despicable Me 2” asked him to write a song for the soundtrack … something happy. “I would’ve never written a song called ‘Happy,'” he said. “It was commissioned for me to do. And on top of that, I didn’t think I was gonna have any more, like, hit records. The universe was like, ‘Well, not only are you wrong about that, but I’m gonna have three different commissions come from three different places, and these are gonna be the biggest records for you.’ It just humbled me because it was like, I couldn’t be pompous. I couldn’t be arrogant.”
“Happy” by Pharrell Williams:
Naturally, Williams, now 51, created the theme song for the new movie “Piece by Piece”:
He’s put a music studio in his office, so he can make songs while simultaneously working on the next Louis Vuitton collection. But he says he never feels as if he’s on the clock.
Asked if the pressure to create takes some of the joy out of it, Williams replied, “It’s not a pressure; it’s a privilege. You can’t go wrong when your aim is to enjoy what you do. You can’t go wrong.”
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Story produced by Robbyn McFadden. Editor: Steven Tyler.
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