Which CD term lengths make sense for you?

Certificates of deposit (CDs) are stable, fixed-term investments that provide you with a secure way to earn interest on your money. Because they are guaranteed by the issuing institution and covered by FDIC insurance, they are among the safest investments you can hold.

CD term lengths can vary from a few months to several years. In addition to the interest rate, picking a term length that closely matches your needs and financial goals is an important consideration when choosing a CD. Here are the key details to know.

CDs pay interest for a fixed period of time, called a term. When the CD reaches its maturity date and the term ends, you receive your money back along with your accrued interest. At that time, you can move the money into a different account or roll it into a new CD.

Term lengths can vary by institution, but typically range between three months and five years.

These lower-commitment CDs mature in less than a year.'

• 3 months
• 6 months
• 9 months

For longer terms, common options typically include:

• 1 year
• 18 months
• 24 months
• 30 months
• 36 months
• 48 months
• 60 months

In general, the longer term you choose, the  higher the interest rate you'll receive. The trade-off is you'll be penalized if you withdraw your money early. Penalties can vary between financial institutions, so be sure to learn that information before moving forward.

CD term lengths are often categorized as short-term, mid-term or long-term. When choosing a CD, consider how the term length aligns with your goals and cash-flow needs. Before you open a CD account, take some time to think about which one is right for you.

Short-term CDs mature in one year or less, and are typically available in three-, six-, nine- and 12-month terms.

Short-term CDs are good vehicles for cash that you don't need to access immediately, but you may need soon. Rates usually will be fairly low compared with longer-term CDs but more than what you'd get on a checking or savings account. If you tend to hold more cash than you need, a short-term CD can be a good option to earn more interest. It may even be OK to hold a portion of your emergency savings in a short-term CD.

Short-term CDs do not allow you to lock in an interest rate for very long. If you decide to roll your money into a new CD when it matures, interest rates may have changed and could be higher or lower.

CD offerings from Thrivent Credit Union

Maximize your interest on your savings. Thrivent Credit Union offers CDs with varying term lengths to fit your long-term goals. 

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A CD that matures in two to three years is considered a mid-term CD. Mid-term CDs will pay a higher interest rate than short-term CDs, but you lose access to your money for a longer time.

You should only use a mid-term CD when you can be reasonably sure you won't need the money within the next couple of years. You shouldn't put emergency funds in mid-term CDs. However, it could make sense to use a mid-term CD for savings that you plan to tap in the near future, like money you are saving for a down payment on a house.

What is a long-term CD? These accounts mature in four years or more. Even if they don't pay much more in interest than mid-term CDs, their longer term means you won't be exposed to as much risk due to changes in interest rates.

Long-term CDs allow you to lock in a fixed interest rate for the entire term of the CD. This can be beneficial if you have longer-term savings goals and want that certainty. Once you've locked in the rate, you won't have to worry about reinvesting at a lower interest rate until the maturity date. Of course, that also means you may miss out if rates rise before your CD matures.

You may want to use long-term CDs for the fixed-income portion of your investment portfolio and retirement accounts. They also are a good choice for general long-term savings that you may not have a specific plan for.

The right CD term length for you is the one that allows you to accomplish your goals most effectively with a comfortable amount of risk. That often means matching the maturity date with when you think you'll need the money.

Of course, that isn't always easy, and can require careful planning. A Thrivent financial advisor can help you find a CD that works best for you while allowing you to maximize the interest on your savings.