February 5th, 2008
A very difficult question that never really gets easier.? There are so many variables and the answer is different for different people.
Hopewell CU blogs about various topics surrounding credit unions.?? They suggest ?4 to 5-years may not be too long.
I believe if you don’t have a CD ladder set-up already, that 2Y – 3Y terms may be best.? CD Rates are currently below where averages tend to be and a 2Y -3Y time frame will?hopefully turn that around.
However, if you have plenty of maturities coming up in the next few years, going longer?should be okay.? You have the earlier maturities to take advantage of higher rates if they begin to go up, and you will also be putting some on the longer end, protecting your rate, in case rates stay down for an extended period of time.
Here is an example.? If you purchase a 4.50% for 2-year today and invest $100,000, you will earn?about $9,000.? If you invest in a 1-year term at the same level, rates will need to?be at the same level next year?in order to earn the same amount.? So do you believe, rates will be the same or higher next year at this time??
Since it still looks like the Fed may lower rates another time or two, it is unlikely rates will be higher or the same next year.? What do you think?
-- By +Chris Duncan