It is impossible to predict rate movements. While it’s easy to figure out that we’re on the low end of the spectrum, we still haven’t a clue as to exactly when rates will move higher.

Beyond this, CDs are a different animal than bonds. Because you don’t have movement in the principle as the CDs we’re discussing aren’t traded on the open market and instead have only an early withdrawal penalty, there is significantly less risk to employing a longer maturity ladder. Heck, 5 years is still towards the short-end in bond terms.

By the way, did you see Australia’s latest bond auction? Rates don’t look too bad over there.

Aye, there’s the rub. Although rates are low, they’re actually still dropping — in the past two weeks, Ally has adjusted their rates down by 0.05% on two separate occasions. Other banks are (generally) in the same boat — still dropping or, at best, perfectly flat.

So… I agree with you that, if rates were rising, I should go short. But they’re not. While they will eventually rise again (they always do), when that will start is anybody’s guess.

When you combine the unknown landscape with the relative ease of breaking and re-deploying, I would argue that locking in the longer term is the smarter move (unless you have a better use for the money).

Only you can really judge your financial situation and make the best possible moves. If you are contemplating changing from your old plan and do something else, try to understand why you want to change plans now: has something changed financially for you?

For me, making this sort of decision (in retirement) would boil down to cashflow, and ensuring that you have the cashflow you need for both the short-term, as well as the long-term horizons and trying to find a suitable balance.

If you are not sure that you will eventually pay the mortgage off completely, I’d probably not pay anything extra on it (while in retirement), since you will always have that monthly mortgage payment regardless.

Nickel) I’m agreeing with others on here, that in a rising CD market (if one could even predict it), you want to buy short-term CDs, and avoid the hassle of penalties. In a falling CD market, opt for the longest terms you can find to lock in the high rates.

The goal being, in a rising-rate CD market, you strive to have your CDs earning close to the average rate (utilizing short-term CDs). In a falling market, you strive to earn an above-average rate (utilizing long-term CDs).

I agree with your strategy, bust any CD yielding less than today’s going rate (after calculating the break-even points in regards to the penalty) — why hold onto an under-performing asset in a rising market?

Personally, I look at my debts as well (5% mortgage) so I’d be putting new money against that instead of buying a 3.3% CD — but have a sizable emergency fund before doing any “investing” (e-fund can be a CD ladder, don’t really care about the rates in the e-fund).

Rates have gone down for 30 years in a row, what makes you think suddenly rates jack up despite all the monetary pump priming?

One should ALWAYS put money in the longest duration, highest yielding CD, which is usually 5 years. This is for money you don’t need, and never plan to touch until retirement or after anyway.

It’s what I call the “DVD Method To CD Investing.” I wrote an entire article about it, and it has literally made me an extra $10,000-17,000 a year for the past 8 years using this strategy. It has been a big boon.

Best,

FS