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.
FAQs
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.
What happens if you put $10,000 in a CD for 5 years? ›
With a rate that high, a $10,000 investment in a 5-year CD could potentially grow to over $12,000 by the end of the term — and that's without any additional contributions. That means the returns on your CD will significantly outpace the returns typically offered by traditional savings accounts, averaging about 0.45%.
Can you put $50,000 in a CD? ›
Typically, jumbo CDs require a minimum deposit of $100,000, though some banks and credit unions offer jumbo certificates with minimum deposits as low as $50,000.
Is a 5-year CD a good investment? ›
A five-year CD usually offers the highest rate of return of any CD, though now, shorter terms like one-year CDs offer higher rates. Experts say this is a sign that savings rates have peaked and are unlikely to climb much higher, especially since the Fed paused rates for the third consecutive time in December.
How much does a $10,000 CD make in a year? ›
Earnings on a $10,000 CD Over Different Terms
| Term Length | Average APY | Interest earned on $10,000 at maturity |
|---|
| 6 months | 2.54% | $127.67 |
| 1 year | 2.58% | $261.07 |
| 18 months | 2.18% | $332.10 |
| 2 years | 2.09% | $426.48 |
3 more rowsSep 3, 2024
The cons of CDs
With a savings account, the money is easily accessible in case of a financial emergency or a change in spending priorities. With CDs, you typically can't withdraw the money whenever you want—at least not without paying a penalty.
Can you ever lose money on a CD? ›
Unlike how the stock market or a Roth IRA can lose money, you typically cannot lose money in a CD. There is actually no risk the account owner incurs unless you withdraw money before the account reaches maturity.
How much does a $50,000 CD make in 5 years? ›
Investing $50,000 in a 5-year CD at today's best rates could yield more than $10,000 in overall interest. Shorter-term CDs have higher APYs and might be better for those who can't lock up $50,000 for five years. Building a CD ladder could increase your access to your savings, while also letting you capture high APYs.
How much interest will $50,000 earn in a year? ›
The interest you can earn on $50,000 in one year can range from $2,125 to $3,000 depending on the interest rate.
Do you pay taxes on a CD? ›
Key takeaways. Interest earned on CDs is considered taxable income by the IRS, regardless of whether the money is received in cash or reinvested. Interest earned on CDs with terms longer than one year must be reported and taxed every year, even if the CD cannot be cashed in until maturity.
To discourage impulsive spending
But a 5-year CD discourages impulsive spending because it typically comes with early withdrawal penalties if you want to access your money before the CD matures. This encourages disciplined savings habits and can help you stay on track toward your financial goals.
How often does a 5-year CD pay interest? ›
Most CDs compound interest at a monthly or quarterly frequency, but some compound annually. The more frequently interest is compounded, the more you'll earn. Using the above example, say you invest $1,000 in a five-CD with a 5% annual interest rate, but this CD accrues compound interest.
What is the highest paying 5-year CD? ›
Best 5-Year CD Rates
- Lafayette Federal Credit Union – 4.32% APY.
- Northpointe Bank – 4.25% APY.
- Mountain America Credit Union – 4.25% APY.
- Securityplus Federal Credit Union – 4.25% APY.
- First Internet Bank – 4.19% APY.
- Department of Commerce Federal Credit Union – 4.18% APY.
- State Department Federal Credit Union – 4.16% APY.
For example, you could earn a 4.61% APY by depositing $10,000 into a 3-year CD right now. If you chose to do so, you would earn $1,447.74 in interest - bringing your total balance to $11,447.74 after three years. You could also lock in your rate for longer, albeit at a slightly lower APY.
How much can I make if I put 5000 in a CD? ›
Depending on the bank, a $5,000 CD deposit will make around $25 to $275 in interest after one year. Online banks and credit unions pay appealing CD rates, and you can earn more interest than at big brick-and-mortar banks. When choosing a CD, consider other factors beyond the interest rate of an account.
How much does a $20,000 CD make in a year? ›
That said, here's how much you could expect to make by depositing $20,000 into a one-year CD now, broken down by four readily available interest rates (interest compounding annually): At 6.00%: $1,200 (for a total of $21,200 after one year) At 5.75%: $1,150 (for a total of $21,150 after one year)
What is the catch with putting your money in a CD? ›
If interest rates fall before the CD expires, the bank is out of luck and must give you the rate it quoted. If rates climb, you're stuck with the lower rate you agreed to when you opened the account. And if you take your money out before a CD matures, you'll pay a penalty -- typically three months of interest.
Can you lose money on a CD if you hold it to maturity? ›
You won't lose money if you don't break your terms
As long as your CD provider has FDIC insurance, your CD deposit will be safe up to $250,000. If you have savings you won't need in the near term, an early withdrawal penalty shouldn't scare you. Today's CD rates are high in comparison to years past.
