Having $50,000 socked away in a bank account can open you up to several lucrative investment opportunities. While investing in the stock market would likely yield the greatest return over a long period of time, certificates of deposit (CD) are a safer way to grow your money at a regular pace.
How much would $50,000 yield in today's best 5-year CDs? Let's take a look at some of today's best offers and find out.
A 5-year CD could yield $11,715 in interest
Investing $50,000 in a 5-year CD could produce $2,625 annually, but your yield will depend on the specific CD that you choose. For perspective, here's how much you could earn from today's top 5-year CDs.
| Bank | APY | Yield on $50,000 |
|---|---|---|
| Quontic 5-year CD | 4.30% | $11,715.12 |
| Bread Financial 5-year CD | 4.15% | $11,272.61 |
| LendingClub 5-year CD | 4.00% | $10,832.65 |
| Capital One 360 5-year CD | 3.90% | $10,541 |
Data source: CD issuers. CD rates are current as of May 6, 2024, but can fluctuate at any time.
There are a couple of factors I want to point out here. First, pay attention to how significant the difference is between the first and last of these two CDs. On the surface the APYs aren't that far apart -- 4.30% versus 3.90% -- but the difference in five-year yield is $1,174. This is why it's important to shop around for the best CD rates before committing, as even a small difference in APY could greatly influence your overall returns over long periods.
Secondly, these yields are accurate as long as you don't withdraw interest periodically from your account, which is typically allowed penalty free at most banks. While taking out interest to cover an emergency expense could stop you from liquidating your account, you also leave less money in the pot to grow with compound interest.
A 1-year CD could yield $2,690
Currently, 5-year CDs don't offer the highest APYs, which is typically not the case. Normally, banks offer higher APYs on longer terms, as they want to increase the incentive to deposit bigger sums in their vaults for longer periods. This trend was reversed during the Fed's latest round of interest rate hikes, which elevated all CD rates, but especially those that mature in the near term.
For example, CIBC is currently offering a 5.36% APY on a 1-year CD. The minimum opening deposit is steep ($25,000), but at that rate you would earn $2,680 on your $50,000 investment. A shorter term like this also means your CD matures faster, giving you access to your money sooner. This could work better for those who want to capture high interest rates, but don't want to lock their money up for five years.
Other short-term CDs that could be attractive for you right now include:
| Term | APY | Bank | Yield on $50,000 (per year) |
|---|---|---|---|
| 3 months | 5.28% | Banc of California (via Raisin) | $647.32 |
| 6 months | 5.05% | Quontic | $1,246.95 |
| 8 months | 5.22% | Southwestern National Bank (via Raisin) | $1,725.20 |
| 12 months | 5.15% | LendingClub | $2,575 |
Data source: CD issuers. CD rates are current as of May 6, 2024, but can fluctuate at any time.
Consider building a CD ladder
You don't have to invest $50,000 in a single 5-year CD. Instead, you could split your money between both short and long CD terms, otherwise known as CD laddering. This lets you stagger maturity dates and might give you more frequent access to your savings. It also lets you take advantage of the higher APYs on shorter terms, while also committing portions of your savings to a longer term.
All things considered, today's best CD terms present a rare opportunity to get decent returns with little risk. Weigh the pros and cons of CDs carefully, but if you have $50,000 in a savings account, moving it into a 5-year CD might be a savvy move.
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