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How to Invest Your HSA Funds

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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Health savings accounts (HSAs) are tax-advantaged accounts designed to help you pay for medical expenses, used in conjunction with high-deductible health plans (HDHPs). They often earn interest on your balances, so your money grows bit by bit.

But did you know that you can also invest your HSA funds? HSA investments can grow your money at a higher rate and help you save toward more long-term goals like retirement. Plus, HSAs offer myriad tax benefits. We’ll walk you through how to invest your HSA funds, explain the benefits of doing so and help you determine if it’s right for you.

How do I make an HSA investment?

When you make an HSA investment, you place your HSA money in stocks, bonds, mutual funds and the like, instead of letting it sit in an interest-earning deposit account. This strategy allows for potentially greater returns and offers a solid long-term savings alternative.

Make sure you meet the required minimum

There’s no right or wrong way to invest your HSA funds, and you can invest any amount you desire and invest in whatever you choose. However, there is typically a minimum amount that you’ll have to meet in your liquid HSA before you can start investing. This amount varies by HSA provider, so be sure to check your provider’s terms.

For example, your HSA must have at least $1,000 in it to start investing any funds. Then, while that $1,000 remains in the account, everything above that amount can be invested.

“I recommend that clients keep their deductible in the cash portion of the HSA account, as they may need it in the current year, and invest the remaining balance,” said Samuel Boyd, CFP and senior vice president with CAPITAL Asset Management Group in Alexandria, Va. This will become more doable as you accumulate money in your HSA over the years.

Consider paying for medical costs out of pocket so you can invest more

Many financial advisors suggest not spending any of your HSA money and investing it all instead. “For individuals that can afford to do so, we often recommend maxing out HSAs each year and paying for medical expenses out of checking/savings accounts,” said Mike Giefer, CFP and private wealth manager at Creative Planning in the Minneapolis-St. Paul area. “That way, the money can be invested in the HSA and continue to compound annually.”

You can even start small, by paying minor medical costs out of pocket instead of taking on big charges right from the start. Bryan Lee, a CFP at Strategic Financial Planning in Plano, Texas, offered a handy tip when it comes to medical costs: “Doctors may be able to treat you like a cash-pay patient for a discount if you have an HDHP,” he said. “You can get 50% off the original price of a doctor’s visit if you pay with cash or a credit card — and if you’re willing to negotiate.”

Of course, paying for medical expenses out of pocket isn’t always a viable option, particularly for low-income individuals and families who rely on HSA funds to pay for health care costs.

Don’t forget to hang on to your receipts

By keeping the receipts for medical expenses that you’ve paid for yourself, you can “reimburse” yourself for past medical expenses if you ever need the HSA funds in the future. You might also consider maintaining a spreadsheet that tracks everything you use your HSA for so it’s even easier to refer back to later.

Should I invest my HSA funds?

HSA Investment Pros and Cons



  • Higher returns than a deposits account APY
  • Additional source of investment income
  • No required minimum distributions
  • Potential tax-free retirement savings
  • Need an HDHP, which doesn’t make sense for every individual
  • Less viable for individuals with higher medical costs
  • Increases out-of-pocket spending for medical expenses

When asked about HSA investment, financial advisors across the country showed strong support for the strategy. “For people who aren’t living paycheck to paycheck, there’s a real opportunity to use the HSA as a supplemental retirement vehicle,” said Darin Shebesta, a CFP at Jackson/Roskelley Wealth Advisors, Inc. in Scottsdale, Ariz.

You can grow your HSA funds significantly more by investing them rather than letting them sit in your account. For example, let’s say you contribute the maximum amount of $3,600 to your HSA each year from age 21 to 65. Let’s also assume that the account is invested to gain an average of 8% per year. By age 65, you’ll have about $1.45 million saved.

Compare that sky-high amount with the $265,185 you’d earn if you kept your money in an HSA with a 2% APY, making the same $3,600 contributions. This calculation doesn’t account for catch-up contributions, which you’ll become eligible for at age 55, or normal increases over the years to the contribution limit.

Of course, the strategy is more possible for some to take advantage of than others. In general, HSA investing is most advantageous in the following scenarios:

  • Those who don’t depend on the funds in the account to cover your medical expenses: This could apply if you’re healthy and don’t visit the doctor often. However, it also applies to high-income individuals who have available cash flow outside of the account to fund any medical costs. For this reason, financial advisors may recommend HSA investment only to their high- or middle-income clients. If your income is on the lower side or you know you’ll have high medical expenses, there’s a greater chance you’ll be more reliant on the HSA to cover those costs. HSA investments become less viable in this situation because there’s not much room for you to pay out of pocket without overextending your own finances.
  • Younger individuals who want to start setting aside money for future medical expenses: As an added benefit in this scenario, younger workers can benefit from having years ahead of them during which their money can grow. The long-term game plan would be to have a pool of funds that has enjoyed tax-free growth over the years that you can then use in retirement.

Where do I make an HSA investment?

You likely have a few investment HSA options available to you including:

  1. Your HSA bank: If your employer has set up your HSA with a bank, the bank might allow you to transfer your HSA funds into a CD or money market account rather than a true investment account.
  2. Other banks that have partnerships with investment firms: For example, HSA Bank has a partnership with TD Ameritrade. This setup can help you transfer your funds more seamlessly. In this case, you might be required to keep a minimum amount in cash while you invest the rest.
  3. Outside options: You don’t have to keep your HSA wherever your employer chooses to house the account initially. You can move it to a bank of your choosing for your convenience. Optum Bank, for example, offers an HSA investment option.
  4. Investment firms: You also can find accounts, like the Fidelity HSA, that offer HSA investments.

How to choose your HSA investments

  • Think of your HSA investments as an extension of your other retirement savings accounts: You should generally treat your HSA investments in the same manner as you would your other retirement savings accounts. In other words, your HSA investments should look very similar to your 401(k) or IRA assets.
  • Align your asset allocation to your own risk tolerance and timeline: For example, if you’re young and just starting to save for retirement, you have some room to take on a bit more risk than someone in their 50s. Still, avoid taking on too much risk to protect your assets and ensure you’re using this HSA hack to your fullest advantage. Be sure to diversify your portfolio as much as possible with investments like mutual funds and ETFs.
  • Be sure to check each investment account’s fees: Investment accounts can charge custodial fees, monthly fees and expense ratios, and many also have minimum balance requirements. If you don’t keep these fees in mind when selecting an account, you could undo some of the benefits of stashing money there by losing it to high fees.

Using HSA investments for retirement savings

HSAs are a great retirement savings tool to use if you have extra money to save but have already maxed out your other retirement accounts for the year. Just remember that you must have an HDHP to have an HSA, and that HSAs have their own contribution limits.

HSA Contribution Limits for 2020 and 2021
HSA contribution limitSelf-only: $3,550
Family: $7,100
Self-only: $3,600
Family: $7,200
HSA catch-up contributions$1,000$1,000
HDHP minimum deductiblesSelf-only: $1,400
Family: $2,800
Self-only: $1,400
Family: $2,800
HDHP maximum out-of-pocket amountsSelf-only: $6,900
Family: $13,800
Self-only: $7,000
Family: $14,000

There are no required minimum distributions on HSAs, so you can access the funds when you need them, not according to a government deadline. You can even start using HSA funds for non-medical expenses after the age of 65. In that case, however, you’ll miss out on one of the HSA’s tax benefits, since you’ll have to pay income tax on whatever you use. Your withdrawals are only tax-free when used for medical expenses.

This is where saving your receipts for medical expenses over the years will come in handy. Once you reach retirement and are ready to start withdrawing money from the HSA, your withdrawals can be considered “reimbursements” for your previous medical expenses as long as you have records to prove that your purchases were made on eligible medical costs. That way, you can avoid paying income tax on any HSA withdrawals after age 65 — even when you’re not currently using that money for a medical reason.

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The Best 6-Year CD Rates in 2021

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

If you want to earn the highest CD rates, you generally need to invest in a longer-term CD. When the bank or credit union gets to keep your money for an extended period of time, it rewards you with higher interest rates.

Higher rates can make a 6-year term an appealing choice when considering CDs. However, there aren’t as many 6-year CDs available as with other CD terms. Most banks don’t offer this particular term, often maxing out at five years or skipping to 7-year CDs. In our analysis, we managed to find ten great choices when sorting through long-term CD data from, a LendingTree-owned company.

To find the best 6-year CDs, we first looked at the highest 6-year CD rates available nationwide. Then we ranked each by APY, taking the accounts’ minimum deposit requirements into consideration for wider availability. We also made sure to include institutions with great health ratings so you know you’re working with a reputable bank with FDIC or NCUA insurance.

The best 6-year CD rates



Minimum deposit amount

Evansville Teachers Federal Credit Union



SRP Federal Credit Union






First National Bank of America



Third Federal Savings and Loan (OH)



INOVA Federal Credit Union





Chartway Federal Credit Union



Marcus by Goldman Sachs



1st Source Bank



As of January 2021
All rates expressed in annual percentage yield (APY) unless otherwise stated.

1. Evansville Teachers FCU— 1.30% APY, $1,000 minimum deposit

The 6-year certificate is Evansville Teachers FCU’s longest term and earns at a competitive interest rate alongside the credit union’s other certificates. You’ll need at least $1,000 to open an account. The penalty for an early withdrawal will equal either $100 or 180 days’ worth of interest, whichever is greater.

ETFCU was founded in 1936 by several teachers in Evansville, Ind. who needed better financial services. Today, you can be eligible for Evansville Teachers FCU membership not just as a teacher, but also through select employers or organizations, or a family or household member. You may also join by donating $5 to the Mater Dei Friends & Alumni Association.


on Evansville Teachers Federal Credit Union’s secure website

NCUA Insured

2. SRP Federal Credit Union — 1.26% APY, $5,000 minimum deposit

A longer-term account worth consideration is the 7 Year Flex Certificate from SRP Federal Credit Union. It requires an opening deposit of at least $5,000. The account allows you to adjust your rate at the end of your 5th and 6th years, allowing you to snag the current rate at the time if it’s higher. The penalty for an early withdrawal equals one year’s dividends.

SRP Federal Credit Union was founded in 1960. SRP membership is open to members of select Georgia and South Carolina communities, their family and household members and spouses of deceased members. You’re also eligible if you sign up for a membership with the Greater Augusta-Fort Gordon Chapter of the Association of the United States Army.


on SRP Federal Credit Union’s secure website

NCUA Insured

3. AFFCU — 1.15% APY, $2,500 minimum deposit

Though this 7-year certificate is already a top earner, you can earn even higher dividends if you are part of AFFCU’s member rewards program. Interest is compounded and credited monthly. The penalty for early withdrawal is half of the dividends you would have earned from the date of withdrawal until maturity on the amount withdrawn.

AFFCU was formed in 1952 by servicemen at Lackland Air Force Base as Lackland Federal Credit Union. It grew over the years, eventually becoming AFFCU, with now over 52,000 members. There are a number of ways to qualify for membership as a member of the military or a civilian in certain areas, but if you live outside of Texas, Oklahoma, Arkansas, Louisiana or Mississippi, your best bet is joining through a $25 donation to the Airman Heritage Foundation.


on AFFCU’s secure website

NCUA Insured

4. First National Bank of America — 1.05% APY, $1,000 minimum deposit

This 72-month CD from First National Bank of America easily earns one of the top spots. The CD will roll over automatically when it matures, or you can opt for a new CD term or withdraw your money altogether. First National allows for partial withdrawals but at a stiff penalty — you’ll lose 540 days’ interest on the amount you take out.

First National Bank of America is based in Michigan and is family-owned. The bank opened their doors in 1955.

5. Third Federal Savings and Loan — 0.70% APY, $500 minimum deposit

The 72-month standard CD is the longest term offered by Third Federal Savings and Loan. It earns at a competitive rate and requires only $500 to open and start saving. The penalty for an early withdrawal from a 72-month CD equals 18 months’ interest, whether earned or not.

Third Federal is based in Cleveland, where it was founded back in 1938.


on Third Federal Savings And Loan (OH)’s secure website

Member FDIC

6. INOVA Federal Credit Union— 0.70% APY, $200 minimum deposit

Earn the best 6-year CD rate from Inova FCU. You need at least $200 to deposit and open up INOVA’s 6-year certificate. The penalty for an early withdrawal from this account is equal to 180 days’ of dividends.

Headquartered in Indiana, INOVA Federal was originally founded to serve the employees of Miles Laboratories in 1942. You can join INOVA through your employer or other organization, or through an immediate family member who is already an INOVA member. Membership is also open to those who join the Tru Direction Financial Literacy Program.


on INOVA Federal Credit Union’s secure website

NCUA Insured

7. EmigrantDirect — 0.70% APY, $1,000 minimum deposit

EmigrantDirect offers a lower but still good rate on its 60- to 120-month certificates of deposit, including its 6-year term. You need $1,000 to open an account here. The penalty for early withdrawals will be an amount equal to 180 days’ interest, whether earned or not.

EmigrantDirect is a digital-only division of Emigrant Bank.


on’s secure website

Member FDIC

8. Chartway Federal Credit Union— 0.65% APY, $0 minimum deposit

You can take advantage of Chartway FCU’s longest share certificate term of 71 months with a $100 minimum. It earns at a competitive rate, which applies to certificates between 60 and 71 months. This rate is not applicable to accounts opened in North Carolina, Nevada, Texas, Utah or Virgina. The penalty for making an early withdrawal from this certificate will equal 180 days’ worth of interest.

Chartway FCU started as NorVA N.A.S. Federal Credit Union by civilian workers at the Norfolk Naval Air Station in 1959. Today, you can join Chartway if you live, work, go to school or worship in select areas in Texas, Utah or Virgina, you work for a select partner employer or you have an immediate family member who is a member. You may also join by donating $10 to Chartway’s We Promise Foundation, which benefits children with medical issues and illnesses.


on Chartway Federal Credit Union’s secure website

NCUA Insured

9. Marcus by Goldman Sachs — 0.60% APY, $500 minimum deposit

A big name in the online banking space, Marcus by Goldman Sachs, offers consistently competitive rates. This includes its high-yield 6-year CD, the longest term among its offerings. It features a competitive annual percentage yield and requires an initial deposit of at least $500 within 10 days after opening the account. Marcus by Goldman Sachs makes a 10-day CD rate guarantee, so if the rate increases during that period, you can switch to that higher rate.

Just be careful of making an early withdrawal from the 6-year CD, as it will trigger a penalty of 365 days’ worth of simple interest on the principal.

Marcus by Goldman Sachs is the banking branch of investment giant Goldman Sachs, which traces its history back to 1869.


on Marcus By Goldman Sachs’s secure website

Member FDIC

10. 1st Source Bank— 0.50% APY, $500 minimum deposit

You can get started with 1st Source Bank’s 6-year CD with just $500. The penalty for an early withdrawal is 12 months’ interest that would have been earned on the amount withdrawn.

1st Source Bank was established back in 1863 in South Bend, Ind. It has branches in Florida, Indiana and Michigan.


on 1st Source Bank’s secure website

Member FDIC

Is it worth getting a 6-year CD?

It can be worth getting a 6-year CD if you’re signing up for the highest rates on our list. Perhaps it would make a solid addition to a CD ladder you’re building.

In truth, 6-year CD rates aren’t always competitive enough to make them a reliable investment. In fact, 5- and 7-year CD terms consistently have much better rates, despite the small one-year difference.

When we compare 6-year CD rates with 5-year CD rates, the 6-year yields struggle to keep up. You can see above that the best 6-year CD rates jump from 1.30% APY at the top all the way to 0.50%. Meanwhile, all the best 5-year CD rates offer a much better savings opportunity, ranging between 1.50% and 1.15% APY. No matter which 5-year CD you pick from the list, you’re bound to yield some solid earnings.

We tend to expect that the longer the CD term, the higher the rate will be, but we just don’t see that when comparing 6-year CDs with other long-term CDs. On the whole, 6-year CD terms are bookended by better-earning products. Opening 5- and 7-year CDs will give you a wider product selection to choose from and a better chance at growing your savings.

Alternative long-term investments

Other than 5- and 7-year CDs, Ken Tumin, founder of (which similar to MagnifyMoney, is owned by LendingTree) suggests turning to individual bonds to beef up your savings. “Much like a CD ladder, the same technique can be used with individual bonds (Treasury, municipal, corporate, etc.) to build steady savings over time,” he offered. Note that non-Treasury bonds do have some default risk that CDs don’t carry when they have FDIC/NCUA insurance.

Another alternative to a bond ladder is a mutual fund or an ETF of bonds. Unlike a ladder, the value of a bond mutual fund or ETF fluctuates with interest rates. This can give you the chance to boost your savings when interest rates go down. However, the opposite is also true, where the value of your bonds decrease when interest rates rise.

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The Best 5-Year CD Rates in January 2021

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Five-year CDs offer some of the highest savings interest rates available. In exchange for keeping your money on deposit for half a decade, banks are willing to dole out higher returns on these long-term accounts. For example, in January, the average 1-year CD interest rate is 0.41% APY and the average 3-year CD rate was 0.62% APY, compared to the average 5-year CD rate of 0.79% APY in the same month.

Longer term CDs do exist, but even their yields don’t often exceed 5-year CD rates. The highest yield on a nationally available CD of six or more years is 1.30% APY.

To make sure you’re getting the best CD rates, MagnifyMoney has uncovered the highest 5-year CD rates available nationwide. Using data from, we found that the best 5-year CD rates earned well above the national average interest rate for 5-year CDs. We also took minimum deposit requirements into consideration, to check for wider customer availability.

The 10 best 5-year CD rates in January 2021

1. Affinity Plus Federal Credit Union — 1.50% APY, $500 minimum deposit

To start earning at Affinity Plus FCU’s competitive rate on a 60-month basic certificate, you’ll need an opening deposit of at least $500. Early withdrawals from this account may trigger a penalty of 365 days’ worth of dividends.

Affinity Plus FCU membership extends to employees and volunteers of select organizations; those who live, work or worship in certain Minnesota cities; and relatives and roommates of current members. You can also easily join by making a one-time $25 donation to the Affinity Plus Foundation. Affinity Plus Federal Credit Union was founded in 1930 and is currently headquartered in St. Paul, Minn.


on Affinity Plus Federal Credit Union’s secure website

NCUA Insured

2. Hiway Federal Credit Union — 1.35% APY, $25,000 minimum deposit

Typically, Hiway Federal Credit Union Certificates require a $500 minimum deposit, but you’ll need to deposit at least $25,000 to unlock the highest rate available on this 60-month certificate. The penalty for an early withdrawal from this account will equal 365 days’ worth of dividends.

Hiway Federal Credit Union was founded in 1931 to serve employees of the Minnesota Department of Transportation. Today, it is based in St. Paul, Minn., and opens up membership to employees of qualifying companies or government agencies; members of Minnesota Recreation & Park Foundation; members of the Association of the U.S. Army; and those who live, work, worship or attend school in the Metro Community Area. You may also qualify through a current member or household member.


on Hiway Credit Union’s secure website

NCUA Insured

3. Wings Financial Credit Union — 1.31% APY, $10,000 minimum deposit

Wings Financial Credit Union offers a few options on its certificates, where different rates apply to different balances and can depend on how often you receive dividend payouts. Interest is paid out quarterly. The early withdrawal penalty equals two years’ dividends (730 days), which is the highest penalty on this list.

Wings Financial was founded in 1938 by Northwest Airlines employees. Today, membership is open to those who live or work in the Minneapolis-St. Paul area or the Seattle-Tacoma area; work in the U.S. aviation industry; are related to current members; and members of the Wings Financial Foundation.


on Wings Financial Credit Union’s secure website

NCUA Insured

4. Partner Colorado Credit Union — 1.30% APY, $500 minimum deposit

Partner Colorado Credit Union offers a solid rate on its 60-month CD, which you can open with at least $500. You’ll lose 180 days’ interest on an early withdrawal.

Founded in 1931, Partner Colorado Credit Union membership is open to a wide range of potential members. This includes current or retired employees of affiliated organizations, family or household members of current members, anyone who lives or works in select Colorado counties and more. You can also join by making a $5 donation — which the credit union will help fund — to the Partner Colorado Foundation.


on Partner Colorado Credit Union’s secure website

NCUA Insured

5. Superior Choice Credit Union — 1.30% APY, $25,000 minimum deposit

While you only need $2,500 to open a Superior Choice Credit Union 5-year share certificate, you’ll need at least $25,000 to earn at its most competitive rate. All other balances will earn at a lower APY but would still hover around our list. According to Superior Choice Credit Union customer service, making an early withdrawal from this account will result in a percentage of your balance being charged as a penalty, including accrued interest.

Established in 1932, Superior Choice Credit Union has a handful of branches near its Superior, Wisc., headquarters. You can also access over 30,000 fee-free ATMs and 5,000 branches nationwide and in Canada through the CO-OP Network. The easiest way to qualify for membership to Superior Choice, especially for those who don’t live in Minnesota or Wisconsin, is by joining the American Consumer Council.


on Superior Choice Credit Union’s secure website

NCUA Insured

6. Lafayette Federal Credit Union — 1.26% APY, $500 minimum deposit

Lafayette Federal Credit Union offers a variety of certificates, but it’s the 5-year fixed-rate certificate you’ll want to turn to for competitive savings. It earns 1.26% APY and requires only $500 to open. You’ll lose 600 days’ worth of dividends if you make a withdrawal from the 5-year term fixed rate certificate.

There are several ways you can become an LFCU member: You can live or work in its serviced areas; work at partner institutions; be an immediate family member of a current credit union member; or be a member of the Home Ownership Financial Literacy Council.

LFCU was founded in 1935 and is based in Rockville, Md. Members can take advantage of its branches throughout Maryland, Virginia and Washington, D.C., as well as CO-OP Shared Branches and ATMs nationwide.


on Lafayette Federal Credit Union’s secure website

NCUA Insured

7. Evansville Teachers Federal Credit Union — 1.25% APY, $1,000 minimum deposit

You can open any fixed-rate certificate at Evansville Teachers Federal Credit Union with only $1,000 — including this 5-year certificate. You will earn this rate until the certificate matures. To gain access to the credit union’s certificates, however, you will also need to open a regular share account with at least $5.

Evansville Teachers FCU was formed to help teachers in Indiana after the Great Depression, but today anyone can join by making a charitable contribution of as little as $5 to the Mater Dei Friends and Alumni Association. Membership may also extend to you through your employer, organization or family or household member.

8. Pen Air Federal Credit Union — 1.20% APY, $500 minimum deposit

Open a 60-month Pen Air Federal Credit Union Certificate Account with a $500 minimum deposit. The penalty for an early withdrawal will equal 180 days of dividends.

Founded in 1936, Pen Air is headquartered in Pensacola, Fla. and has 16 locations in Florida and Alabama. You qualify for Pen Air membership if you are active duty or retired military, a civil service employee, an employee at a partnering Select Employer Group or an immediate family member of eligible individuals. You can also become a member by joining the Navy-Marine Corps Relief Society, Inc.


on Pen Air Federal Credit Union’s secure website

NCUA Insured

9. Ideal Credit Union — 1.16% APY, $25,000 minimum deposit

Investing $25,000 in Ideal Credit Union’s 60-month CD will earn you this high APY, but amounts less than that still pay out at a rate that would nearly make our list. The penalty for withdrawing funds before maturity will cost you the lesser of 180 days’ interest or interest earned.

Ideal Credit Union was established in 1926 by and for postal workers as the St. Paul Postal Employees Credit Union. Today, anyone who lives, works, worships, attends school or volunteers in any of six Minnesota counties can join the credit union. You can also join by making a one-time $5 donation to the John D. Miller Scholarship Foundation, which is donated automatically during the process of opening an account.

10. Lake Michigan Credit Union — 1.15% APY, $500 minimum deposit

Lake Michigan Credit Union’s 60-month CD only requires $500 to open. What’s more, if you have other accounts with the credit union that accrue points through their MORE VIP Relationship Rewards program, you can cash in for an additional 0.25% on the listed APY if you have enough points.

Membership to Lake Michigan CU is open to anyone who donates $5 to the ALS (Amyotrophic Lateral Sclerosis) Foundation, but is also open to select individuals in Michigan or Florida and family members of current LMCU members.


on Lake Michigan Credit Union’s secure website

NCUA Insured

5-year CDs vs. savings accounts

If you’re simply looking for the highest rates available, 5-year CDs are going to seem much more appealing than a savings account. Even the best savings accounts can’t quite reach the 5-year CD rates you’ll find above. Plus, 5-year CDs lock in their rates at opening for the term of the investment, guaranteeing your rate of return. This can make for a great savings vehicle for conservative investors, who don’t want to ride the waves of an ever-changing economy.

Looking at the numbers, a $5,000 deposit into a 5-year CD at 3.25% APY would result in $881 of extra savings at maturity. Meanwhile, making a $5,000 deposit into one of the best savings accounts at 2.25% APY lands you with nearly $595 in savings after five years.

Savings accounts do provide easier access to your money, though. If you find yourself in a pinch suddenly, you can make a quick ACH transfer online or a withdrawal at a branch or ATM. Withdrawing from CDs isn’t as easy, especially when you account for the money you’ll lose to early withdrawal penalties. As you can see from the accounts above, early withdrawals from a 5-year CD can result in the loss of six months’ to two years’ worth of interest.

5-year CDs vs. other investment options

Investing in individual bonds — Treasury, municipal, or corporate — can be a solid alternative to saving with 5-year CDs. Non-Treasury bonds do have some risk by default as they don’t have the FDIC/NCUA insurance coverage limits. You can use these bonds to build a ladder similar to a CD ladder, so each bond matures a year or so apart.

An alternative to creating a bond ladder is to invest in a mutual fund or ETF of bonds. Unlike a ladder, however, the value of a bond mutual fund or ETF does fluctuate with interest rates. So when interest rates go up, the value of those investments will drop and vice versa.

The best way to maximize your 5-year CD investment

If you’re putting away money for five years, you’re going to want to make it worthwhile. For starters, CDs are best for those who have already maxed out their other savings accounts and have their emergency savings in a liquid savings account for easy access. They’re also better if you have a higher deposit to stash away. That will earn more interest in the long term for more tangible savings.

For example, placing $1,000 in a 5 year CD with a 3.25% APY will yield about $176 in savings by the end. Making a $10,000 deposit, on the other hand, lands you with a little over $1,764 in interest. That $176 is a good chunk of change, but you should make sure it’s enough to justify stashing away $1,000 now instead of perhaps waiting to make a larger deposit.

A great way to utilize a 5-year CD is to include it in a CD ladder. A 5-year, five-CD ladder is a standard and easy-to-track method of saving. You open five CDs, each maturing a year apart. Once a CD matures, you renew it as a new 5-year CD. Eventually, all your CDs will be 5-year accounts, maturing a year apart. You can also choose to withdraw your money whenever an account matures if you need to use those funds. This allows you to take advantage of the longer terms’ higher rates and bigger savings.