Here's the Only Reason I'd Put $50,000 in CDs

I'm not a CD fan, personally. I'm younger, I don't have a house purchase coming up, no college tuition looming, no big expense on the horizon. My money is better off invested in the market to grow for the long term.

But I've thought about this a lot, and there is one situation where I'd move a large chunk (say, $50,000 or more) into a CD without blinking.

If I were a near-retiree -- or freshly retired -- and I needed to protect money I knew I'd be spending in the next one to three years, a CD is exactly where I'd put it.

Why near-retirees play by different rules

When you're young and investing, a market crash is annoying. But when you're retired and withdrawing from your portfolio, a market crash can be genuinely devastating.

There's a name for this problem: sequence of returns risk. It means that a bad market in your first few years of retirement hits way harder than the same bad market a decade later.

Here's why. When the market drops and you're withdrawing $40,000 or $50,000 a year to live on, you're selling shares at a loss. Those shares never get a chance to recover.

A CD solves this specific problem neatly. If I were getting ready to retire, I'd probably move one to three years of living expenses into CDs. That way I could pull from those should the market go south instead of selling any of my portfolio at a loss.

If there's no immediate crash, that's great too. I'd still be earning a decent guaranteed rate in those CDs and have more options at withdrawal.

Compare the best CD rates available today from FDIC-insured banks.

What CDs actually do really well

For this specific purpose, CDs check a lot of boxes:

• The rate is locked in. Top CD rates right now are currently around 3.50% to 4.00% APY, with some options above that. A locked in rate means you know exactly what you're earning for the full term -- no surprises.
• The money is protected. CDs at FDIC-insured banks are covered up to $250,000 per depositor, per institution. If you deposit $50,000, it's not going anywhere.
• You can ladder CDs strategically. If you open multiple CDs with staggered maturity dates -- one maturing at 12 months, another at 24, another at 36 -- you've essentially built a guaranteed income drip timed to when you need it. It's called CD laddering.
• Rates still beat inflation right now. Even with rates declining following Federal Reserve cuts in 2025, top CD rates are still outpacing inflation for many savers. That's a real return on protected money.

Why I'm still not putting my own money in one right now

Right now I don't have income I need to protect in the next year or two. I'm employed and plan to be for at least the next few years.

My investment time horizon is long and I can easily ride out a market downturn. Locking money into a CD when I could be invested in index funds would actually cost me over time.

The S&P 500 has historically returned around 10% annually over the long run. A 4.00% CD is a great deal when you need stability in the short term. But it's a mediocre deal when you have decades to let compounding do its thing.

CDs also come with early withdrawal penalties if you need the money before the term ends. For someone without a clear, near-term spending need, I'm keeping all my short-term cash in a high-yield savings account. Sure, the rate isn't locked in, but I'm still earning 4.00% APY right now.

The bottom line

CDs aren't my thing right now, based on my current goals and time in life. But if my retirement was a few years out and I had money I knew I'd need soon, I'd absolutely be putting at least $50,000 into a CD.

That money would earn a guaranteed rate, stay safe with FDIC insurance, and protect me from having to withdraw from my investment portfolio at an inopportune time.

See today's best CD rates and find the right term for your timeline.