How much will a $5,000 long-term CD earn now?

On first thought, locking any portion of your money away for an extended period may not seem wise. Not only will you lose access to it in case its needed for an emergency , but you also won’t be able to take advantage of any new investment or income-earning opportunities without it. And, with a certificate of deposit (CD) account, you’ll need to pay a costly early withdrawal penalty to regain access.

But for a moderate amount of money, like $5,000, it can still be worth doing now. With inflation rising over the last four consecutive months and interest rate cuts delayed for the time being, now may be a smart time to take advantage of today’s elevated CD rate climate while it is still readily available. And with a long-term CD (which has a maturity date over 12 months), you can easily do so. This will allow you to earn a substantial return simply not available with some popular alternatives and it will protect your money against interest rate volatility during that term. 

Before getting started, however, savers should do the calculations to better understand the value of opening a $5,000 long-term CD now. Below, we’ll do the math.

See how much more money you could be earning with a long-term CD here.

How much will a $5,000 long-term CD earn now?

Historically, interest rates have been higher on long-term CDs than they were on short-term ones. But thanks to the volatility and uncertainty of the wider rate climate in recent years, banks have reversed that trend and offered higher rates on CDs with shorter terms. 

But that doesn’t mean you’ll earn more money that way. Thanks to the extended interest-earning potential, and a rate that’s only marginally lower than the top short-term CD rates, savers can still earn a significant return with a long-term CD. Here’s what a $5,000 long-term CD account would earn now, based on readily available rates for each term:

• 18-month CD at 4.16%: $315.22 for a total of $5,315.22 upon maturity
• 2-year CD at 4.15%: $423.61 for a total of $5,423.61 upon maturity
• 3-year CD at 4.15%: $648.69 for a total of $5,648.69 upon maturity
• 5-year CD at 4.25%: $1,156.73 for a total of $6,156.73 upon maturity

With the shortest of these options, savers stand to earn hundreds of dollars in interest, and with the longer one, they can earn more than $1,100. So if you have $5,000 ready to deposit and can comfortably afford to part with the money for the full CD term, now may be the time to act.

Get started with a long-term CD online now.

What about $5,000 short-term CDs?

Not convinced that a $5,000 long-term CD is worth opening now? It can help to compare the above returns to what can be earned with the same amount of money deposited into a short-term CD if opened now. Here is how those returns currently look:

• 3-month CD at 4.50%: $55.32 upon maturity for a total of $5,055.32 
• 6-month CD at 4.45%: $110.04 upon maturity for a total of $5,110.04
• 9-month CD at 4.35%: $162.25 upon maturity for a total of $5,162.25
• 1-year CD at 4.40%: $220.00 upon maturity for a total of $5,220.00

When comparing the short-term CD account returns to the long-term ones, the difference becomes stark. The highest return with a $5,000 short-term CD is still almost $100 less than the lowest return with a $5,000 long-term CD ($220.00 versus $315.22). So it may be worth crunching the numbers to find a way to open a long-term CD, even if the deposit amount needs to be adjusted slightly from the $5,000 example calculated here.

The bottom line

Savers stand to earn hundreds and possibly over a thousand dollars by depositing $5,000 into the right long-term CD now. But it will take some minimal effort to find a good CD rate. So visit your local bank branch to see what they have to offer, but also consider online banks, which may have better rates and more flexible terms. Remember that any money deposited will be subject to that early withdrawal penalty, so it’s critical to deposit an amount that you feel you can comfortably part with for the full CD term. 

Learn more about your current CD options here.

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Stephen Collopy

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