Question: I have money in a certificate of deposit that will mature soon. I want to reinvest it for no longer than five years. How can I find the highest return?
Answer: Because the economy appears to be in a period of recovery, interest rates should be heading back up, so this is not the time to tie up your money for a long period of time.
Investigate certificate of deposit rates. Call your local credit union or bank, or check out their rates on the Internet. If the rate for an 18-month CD is only slightly more than a six-month CD, stay with the shorter period with the expectation that the interest will be higher in six months. Many newspapers, including USA Today, provide a summary of the highest CD yields.
An online source of information is www.bankrate.com. Recently, the highest six-month CD was paying 2.95 percent; the highest one-year CD yield was 3.5 percent; the highest two-and-a-half-year CD was 4.4 percent; and the highest five-year CD yield was 5.6 percent. Most of these rates are offered by banks outside of Colorado and a telephone number is provided if you want to purchase a CD from one of these institutions. Don’t forget to make a note of the maturity date. At maturity, you can decide to establish a new CD with the same institution, you can move your funds to another credit union or bank or simply withdraw the funds and use them. If you don’t instruct the institution, the funds will be automatically renewed, but at a different interest rate.
Treasury bills and notes are another short-term choice. You can buy bills that mature in three months, six months and one year. The most current interest rate for a one-year treasury bill is 2.23 percent. Treasury notes mature in one to 10 years. The minimum investment is $1,000.
You can purchase treasury notes (mature in five years) and bonds (mature in more than 10 years) that are inflation-indexed. The note or bond has a fixed interest rate that remains the same until maturity. They also have an inflation-rate component that changes twice a year, up or down, depending upon the rate of inflation.
You can get more information about treasury bills, notes and bonds at www.publicdebt.treas.gov. If you want to buy treasuries directly, establish an account online at www.treasurydirect.gov. You also can purchase over the telephone at 1-800-722-2678 or by mail.