CD Rates Are Down, Where Should You Put Your Money Now?

CD Rates Are Down, Where Should You Put Your Money Now?

by Sep 12, 2019Investments

Certificates of Deposit (CDs) have traditionally been one of the cornerstones of every investor’s portfolio for many decades. However, after the recession in 2008, CD rates plummeted. While the days of sub-2% interest rates on CDs seem to be behind us for now, current CD rates are still at a historic low compared with rates before 2008.

For high net worth individuals, the current market for government-backed investment products is producing lower returns than at any point in recent history. If you are currently evaluating the market for CDs, there are likely better options to consider.

CD Rates Are At Historical Lows

To give you an idea of exactly how far CD rates have fallen over the last thirty-five years, take a look at this chart from that shows historical average CD rates going back to 1984:

Historical CD Rates: 1984-2017

As you can see, CD rates have been on an overall downward trend since 1984, with brief rate spikes every three to five years.

Who Controls CD Rates?

Interest rates for certificates of deposit are set by the banks that issue them. However, bank rates tend to mirror the federal funds rate closely. The Federal Reserve System determines the federal funds rate, and the chairman of the Federal Reserve (currently Jerome Powell) typically announces any rate changes.

When the federal funds rate changes–whether up or down–most banks follow along and adjust interest rates on their investment products accordingly.

Where To Invest Instead

So, where should you invest your money instead of CDs? There is no one “right answer.” The best investments are the ones that help you achieve your financial goals. Depending on what stage of life and career you’re in, you may be more concerned with building your savings, planning for retirement, or taking on more risk to grow your wealth.

Your financial goals will ultimately determine what the best investment products for you are right now. Working with an experienced financial planner is a great way to take stock of where you’re at, evaluate your goals, and get a recommendation for achieving those goals.

To learn more or to schedule a free consultation, please contact us today!

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