Do you have a bank CD that’s about to mature, and you’re not sure what to do next? You’re not alone. A huge amount of money is tied up in maturing CDs, and many people are facing the same question: what’s the best step forward?
When CDs mature, you’ll need to decide quickly what to do with your money. The decisions you make now can have a big impact on your financial future.
The Coming Wave of CDs Maturing: $2.5 Trillion in the Next Year
In the coming months, an estimated $2.5 trillion in CDs will mature. That’s a staggering amount of money looking for its next home.
Here’s the challenge: interest rates may start dropping again. If that happens, many people will see significantly lower returns when they reinvest. Historically, we’ve seen interest rates drop as low as near-zero levels, leaving savers with limited options to earn decent returns.
A Look at Interest Rates and the Challenges for CD Holders
Interest rates have been all over the place in the last 20 years. After the 2008 financial crisis, rates dropped to nearly zero and stayed there for years. Recently, rates climbed back up due to inflation, but many experts believe they could fall again.
Here’s what this might mean for CD holders:
- Low returns: As rates drop, new CDs maturing may offer much lower yields.
- Reinvestment risk: You’ll need to reinvest at lower rates when your current CD matures.
This chart shows the rollercoaster of federal interest rates from 2002 to today:
| Year Range | Interest Rate Trend |
| 2009–2016 | Near-zero rates |
| Post-2020 | Sharp rate increase due to inflation |
| Future | Potential for falling rates |
Exploring Safe Alternatives for Maturing CDs
If you’re looking for safe options for your money, there aren’t many choices. Most people think of:
- Bank accounts
- Bank CDs
- Treasuries
While these options are secure, they’re also highly sensitive to interest rate changes. But there’s another choice worth considering: MYGAs (Multi-Year Guaranteed Annuities).
What Is a Multi-Year Guaranteed Annuity (MYGA)?
A MYGA works like a CD. You lock in a guaranteed interest rate for a specific period. There are no fees, no surprises—just straightforward growth.
The biggest advantage? MYGAs often provide higher interest rates than CDs.
Comparing Interest Rates: MYGAs vs. CDs
Here’s how MYGAs stack up against CDs as of today:
| Term | Highest CD Rate | Typical MYGA Rate |
| 12 Months | 4.17% | ~5% |
| 24 Months | 4.5% | ~5.25% |
CDs offer decent short-term rates, but the terms are much shorter. What happens if rates fall before your CD matures? That’s called reinvestment risk—a big problem for savers.
Accessing Your Money: CD Penalties vs. MYGA Flexibility
CDs often lock up your money until they mature. If you need to withdraw early, the penalties can be severe. For example:
- A 24-month CD typically charges 12 months’ interest as a penalty for early withdrawals.
MYGAs, on the other hand, offer more flexibility:
- Interest-only withdrawals (monthly or yearly)
- 10% lump-sum withdrawals annually without penalties
- Interest accumulation withdrawals for any earned interest
Planning for Predictable Income with MYGAs
One major benefit of MYGAs is their ability to provide predictable income. Here’s how it works:
- Determine how much annual income you need.
- Divide that by the interest rate to find the principal you’ll need to invest.
For example, if you need $50,000 annually and a MYGA offers 5% interest:
- $50,000 ÷ 0.05 = $1,000,000
The principal is protected, and the full amount is returned at the end of the term.
Renewal Options for CDs and MYGAs
When your CD matures, the bank gives you 7–10 days to decide what to do. That’s a very short window, especially for large sums of money.
MYGAs, however, provide more breathing room. Most companies give you at least 30 days to decide your next step. MYGAs also offer the option to turn the balance into a lifetime income stream, which isn’t available with CDs.
Key Differences Between CDs and MYGAs
Here’s a quick comparison of the two options:
| Feature | CDs | MYGAs |
| Early Withdrawal | Penalties apply | Free withdrawals (10% or interest) |
| Tax Treatment | Taxable annually | Tax-deferred until withdrawn |
| Rate Guarantees | Typically shorter terms | Longer guaranteed terms |
| Renewal Period | 7–10 days | At least 30 days |
Is Your CD Maturing? Let’s Plan Your Next Step
If you have CDs maturing soon, now’s the time to explore your options. With interest rates potentially dropping, you’ll want to find a safe, higher-yield alternative that fits your needs.
Click on my schedule to book a quick call. Together, we can find the best strategy for your situation. Let’s protect your savings and secure your financial future.
Podcast Episode 52: CDs Maturing Soon? How to Avoid Reinvestment Risk and Find Higher Rates
Download Episode 52: CDs Maturing Soon? How to Avoid Reinvestment Risk and Find Higher Rates on Apple Podcast