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1-year vs. 5-year CD: Which CD term do experts recommend now?
1-year vs. 5-year CD: Which CD term do experts recommend now?

CBS News

time07-07-2025

  • Business
  • CBS News

1-year vs. 5-year CD: Which CD term do experts recommend now?

We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. The choice of a 1-year CD or a 5-year CD will come down to a series of personal considerations now. GYRO PHOTOGRAPHY/amanaimagesRF Certificate of deposit (CD) account interest rates remain attractive in mid-2025, with top CDs offering yields between 4.00% and 4.40%. The Federal Reserve kept its benchmark interest rate frozen at its June meeting, keeping it at a range of 4.25% to 4.50%. Fed officials still project two rate cuts by year-end, but uncertainty is high as they weigh a variety of economic concerns against the need for economic growth. This environment has created a dilemma for savers who are torn between locking in today's rates for five years or keeping their options open with shorter one-year terms. To help you navigate this decision, we consulted three financial experts to find out which CD term is smarter now. Below, we'll detail what they want you to know. Start by seeing how high a CD interest rate you could qualify for here. 1-year vs. 5-year CD: Which CD term do experts recommend now? "We're generally leaning toward 1-year CDs right now," says Christopher L. Stroup, a certified financial planner and president of Silicon Beach Financial. "With rate cuts likely in the next 12 to 18 months, shorter terms offer flexibility and let [you] reassess when rates shift," he says. When weighing your options, though, don't focus only on current rates. "Today's shorter-term rates can be higher than longer-term rates … [making them] more tempting," Mark Sanchioni, chief banking officer at Ridgewood Savings Bank, points out. "[But] when that term is over, [you] may be disappointed with [your] renewal rate options." Sometimes, it can work out in your favor to take a slightly lower rate for a longer term. Both experts agree that the right CD choice depends on your timeline, risk tolerance and financial goals. When it would (and wouldn't) make sense to choose a 1-year CD now "A 1-year CD would be appropriate [if you need] access to [your] funds within the next year," says Rick Wilcox, head of retail product management and development at PNC. Industry professionals say that 1-year CDs make sense in these scenarios: You're saving for a house down payment or a wedding in the next 12 to 18 months. You're a business owner building cash reserves for a product launch or equipment purchases. You want to park an emergency fund and earn a predictable return but may need to withdraw soon. Short-term CDs work especially well for entrepreneurs and business owners. Stroup mentions an early-stage founder who had $250,000 in reserve before a funding round. "We chose a 1-year CD to earn interest while keeping cash accessible," he says. A 1-year CD becomes less attractive if you don't need the money for several years, though. "[You'd] risk reinvestment uncertainty when rates drop and miss out on locking in current yields," Stroup explains. Compare your top 1-year CD account offers here now. When it would (and wouldn't) make sense to choose a 5-year CD now "A 5-year CD would be appropriate [if you don't] have an immediate need for the funds, feel interest rates may decline over this period and/or desire safety and security," says Wilcox. Financial advisors say that 5-year CDs make sense if you find yourself in one these scenarios now: You're within 10 years of retirement and want guaranteed income without market risk. You recently received a windfall (e.g., a business sale or inheritance) and want to preserve your capital. You're building a CD ladder A longer-term CD choice often benefits seniors seeking steady income. "[I worked with] a retired aerospace engineer with no near-term liquidity needs," Stroup recalls. "[He] used a 5-year CD ladder to lock in predictable, penalty-free income for the next five years." A 5-year CD may not be the best choice if you anticipate needing funds before maturity. "[Anyone] considering [this] must be certain they will [not] need to access those funds over the next five years," Sanchioni emphasizes. Early withdrawal penalties can amount to two years of interest or more, eroding a substantial portion of your returns. This option also backfires if you expect CD interest rates to climb steadily. You'd miss out on higher yields by staying locked into today's rates for half a decade. The bottom line "A CD should be part of a broader strategy, not a standalone decision," Stroup stresses. Many savers are hedging their bets in today's unpredictable rate environment. Sanchioni notes that more clients are using a "Three Buckets" approach — keeping some money immediately accessible, some in short-term CDs and some locked up long-term. Taking this route can help you come out ahead no matter how rates move. Regardless of the approach you take, though, experts recommend aligning your CD term with your actual cash flow needs rather than timing the market.

Housing market update spells more trouble
Housing market update spells more trouble

Yahoo

time28-06-2025

  • Business
  • Yahoo

Housing market update spells more trouble

Housing market update spells more trouble originally appeared on TheStreet. Let's say it like it is The housing market of late has been far from dazzling, and everyone's feeling the pinch. 💵💰💰💵 New home buyers are hitting pause, with builders stuck with unsold inventory, as lenders continue clamping down. What looked like a robust housing market not too long ago now feels frozen. Buyers are stepping aside, builders are trying to unload homes, and no one's sure how ugly this dip might get. High mortgage rates, inflated home prices, and tariff drama have collectively led the new-home market into no-man's land. Affordability's taking a hit, and buyers continue being circumspect. Moreover, given the most recent development, things could take a while to improve. Since Covid, the U.S. housing market's been on a rollercoaster first was a massive price surge, followed by a Fed-fueled pullback and now a choppy cooldown heading into mid-2025. For perspective, home prices jumped about 43% from early 2020 to June 2022. That momentum had everything to do with rock-bottom mortgage rates, stimulus-fueled savings, and the powerful remote-work boom. However, the market started to cool fast once the Fed kicked off its aggressive rate hikes in early 2022. By mid-2023, 30-year mortgage rates surged from just under 3% in early 2021 to over 7%. Price growth hit the brakes, too. By late 2024, some cities were seeing significant year-over-year declines, and by April of this year, national gains were down to just 2.7%. Yet affordability is getting squeezed hard. Home prices continue outpacing wage growth, and with borrowing costs stuck high, a lot of current homeowners are staying put. At the same time, tariffs are messing with material costs, crippling supply. Inventory levels still feel tight as smart money dumps rental homes after nearly two years of falling rents. Looking ahead, the majority of analysts see either sluggish growth or slight price drops through the rest of 2025. J.P. Morgan expects sub-3% gains, while Redfin sees prices slipping about 1% by year-end. More on the housing market: New Home Sales Plunge, Keeping Us on the Sidelines With This Bullpen Name Billionaire Bill Ackman doubles down on major housing market bet Rising gold price has a surprising connection to house sales The real relief for buyers depends on the Fed cutting rates and boosting new-home construction to ease the supply crunch. Sales of new single-family homes nosedived again in May, dropping to a 623,000 annual pace. That's down roughly 13.7% from April and 6.3% lower compared to a year ago, highlighting significant market inventories of new homes continue piling up while revenues cool off. By the close of May, builders had just 507,000 new homes on the market, up 1.4% from April and 8.1% from last year. That's close to 10 months' worth of supply, pointing to substantial oversupply. Affordability remains the biggest roadblock The National Association of Realtors' chief economist, Lawrence Yun, says that median home prices have jumped over 50% since 2019, but wages haven't kept up. Layer that up with a 6.8% average mortgage rate and it's no surprise people are backing off Moreover, it's not homebuilders feeling the pinch. The weakened housing market has hit everyone from mortgage lenders to furniture stores. If this slump sticks around, it could prove to be a drag on consumer confidence and slow down the broader economy. Naturally, things are unlikely to get much better unless mortgage rates drop or prices take a meaningful dip. Builders might need to cut prices and throw in more incentives. It seems like high inventory and soft demand will stay for a market update spells more trouble first appeared on TheStreet on Jun 26, 2025 This story was originally reported by TheStreet on Jun 26, 2025, where it first appeared. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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