A popular go-to for investors, CDs are a low-risk way to get guaranteed returns that can help diversify your portfolio and minimize the negative impact of a stock market downturn.
A Certificate of Deposit (CD) is an agreement with a bank or savings and loan, for money that gets deposited for a set amount of time. CDs generally offer competitive rates of return (compared to savings accounts) and are FDIC insured.1 Maturities range from 30 days to several years, with CDs offered through Northwestern Mutual usually starting at three-month maturities.
Northwestern Mutual offers several CD options including interest bearing fixed,2 interest bearing variable, inflation-indexed, and Zero Coupon,2 so you can find the one that works with your financial plan.
CDs have a competitive rate of return.
As an investor, if you're looking to preserve principal and get a competitive rate of return on your money for a set period of time, brokered CDs can be a sound foundation to your portfolio.
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Yes. The FDIC (Federal Deposit Insurance Corporation) insures deposits held in banks, including checking and savings accounts, money market deposit accounts, and certificates of deposit (CDs). That means if you deposit money at a FDIC-insured bank and it fails, you won't lose a single cent as long as your balance doesn't exceed $250,000.
To find out more about investing in certificate of deposits (CDs), read our article.
When your CD reaches maturity, your financial institution will send you a notice that your term is about to end. At that point, you have several options to choose from: you can renew your CD for another term (however, it might not be at the same interest rate), move your money to another account at the same bank or a different bank, or you could withdraw your money if you need it immediately.
With a CD, you're committed to keeping your money at the same bank for a set amount of time. If you need to withdraw some of it before maturity, you typically can't take out a portion of your balance, only the full amount, so you could be on the hook to pay a penalty. The amount you'll be penalized depends on your bank or credit union, so be sure you understand their policy, but typically they're calculated as a set period's worth of interest.
Only in rare cases. For example, if you need to withdraw your money before the CD reaches maturity, you'll be on the hook to pay a penalty. The amount you'll be penalized depends on your bank or credit union, but typically they are calculated as a set period's worth of interest. That penalty could eat up some or all of the interest you earned as well as a piece of your principle.
The right time period for you will depend on your financial goals and needs. CDs come in many different terms, from months to years, so you'll need to decide how long you want to lock up your money. Remember, choosing the right CD term is a personal decision based on your specific financial situation.
