‘My thought was to invest in a CD for 5 years to lock in a higher rate’: How can I maintain high yield after potential Fed rate cuts?

Hi Money Minder,

Hi Money Minder,

So, looks like the Fed might cut rates soon, right? I’m thinking about making a move to keep getting a nice return without risking it all.

We’ve got a decent chunk stashed away in a High-Yield Savings Account (HYSA) with our credit union, pulling in a sweet 4%. We don’t want to gamble with most of it, since it’s earmarked for paying off my wife’s student loans if her Public Service Forgiveness plot falls through.

We don’t need the cash right now and plan to leave it untouched until the loans are forgiven in a few years. We pretty much pretend it’s not even there and let it grow with interest.

With a potential rate cut on the horizon, I’m thinking of parking some dough in a 5-year CD (or maybe a mix of CDs with different terms) to secure a higher rate. Our credit union offers CDs at 4% and they’re protected from early withdrawals.

What do you reckon? Is this a solid move? Any other options I should be looking at?

Looking forward to hearing from you!

Seeking Financial Wisdom

Response from THE MONEY MINDER:

Thank you for reaching out to us! We are here to help you with all your financial needs and provide you with expert advice on managing your money. Feel free to contact us anytime for personalized assistance.

"Hello There,"

Hello,

It sounds like you have a well-thought-out plan in place to maximize your savings while keeping risk at bay, especially in light of a potential rate cut from the Fed. Firstly, congratulations on being proactive with your financial decisions and thinking about the future.

Given your current situation, where you have a significant amount in a High-Yield Savings Account (HYSA) earmarked for student loan repayment, considering a Certificate of Deposit (CD) at 4% from your credit union seems like a solid choice. Locking in a higher rate for a longer duration, like a 5-year CD, can offer you a predictable return with call protection.

While exploring other options is always a good idea, such as diversifying with CDs of varying durations or looking at other financial institutions offering competitive rates, your main priority seems to be safeguarding this money for your wife’s loan repayment. By investing in these CDs, you are ensuring a stable yield without taking on unnecessary risks while waiting for the student loans to be forgiven.

In conclusion, going with the CD option from your credit union appears to align well with your current financial goals and risk tolerance. However, I recommend researching and comparing similar options before making a final decision to guarantee the best possible outcome for your savings.

Best of luck with your financial planning, and feel free to reach out if you need further assistance or advice.

Farewell from THE MONEY MINDER.