Here's how much you could make if you put $20,000 into a 5-year CD right now (2024)

FAQs

Here's how much you could make if you put $20,000 into a 5-year CD right now? ›

So, no matter which 5-year CD you choose, you're going to earn between $4,000 and $4,700 on a $20,000 deposit at today's best rates. Keep in mind, you have to pay taxes on CD interest, so your total return could be less. Still, this is a decent return for a relatively risk-free investment.

CD returns are impressive

What does that mean if you deposit $20,000? Here's how much money you stand to earn: $20,000 at 4.5% APY: $4,923.64 in interest (for a total of $24,923.64 after five years) $20,000 at 4.55% APY: $4,983.32 in interest (for a total of $24,983.32 after five years)

That said, here's how much you could expect to make by depositing $20,000 into a one-year CD now, broken down by four readily available interest rates (interest compounding annually): At 6.00%: $1,200 (for a total of $21,200 after one year) At 5.75%: $1,150 (for a total of $21,150 after one year)

If you're in a position to save in today's higher interest rate environment, investments like CDs could help accelerate your savings. CD rates have skyrocketed since 2022: 1-year CD rates have increased more than twelve-fold, with 3-year and 5-year CDs up nearly six-fold and five-fold, respectively.

The biggest risk to CD accounts is usually an interest-rate risk, as federal rate cuts could lead banks to pay out less to savers. 7 Bank failure is also a risk, though this is a rarity.

The national average APY for a one-year CD is 1.74 percent, based on Bankrate research, which shows this average has increased or remained the same since March 2022. If you deposited $10,000 into a one-year CD that pays this national average rate of 1.74 percent, in one year it would be worth a total of around $10,174.

Why should you deposit $5000 in CD now? ›

For context, in 2021, when rates were around their lowest, the national average 12-month CD had an APY of just 0.15%. For a $5,000 deposit, this is the difference between earning $250 in interest over a year versus earning only $7.50 over that same time frame.

Most CDs compound interest at a monthly or quarterly frequency, but some compound annually. The more frequently interest is compounded, the more you'll earn. Using the above example, say you invest $1,000 in a five-CD with a 5% annual interest rate, but this CD accrues compound interest.

CURRENT CD RATES: 5-year

4.15% APY*. 1.40%. “National average” refers to the Federal Deposit Insurance Corp. national averages.

For example, a five-year CD can earn a higher (and guaranteed) rate than a typical savings account while still offering safety. The average 5-year CD yield is 1.42 percent APY, according to Bankrate's national index survey of banks and thrifts on May.

CDs with terms longer than one year

If, for example, you opened a five-year CD with $10,000 on Jan. 1, 2024, that pays 4 percent APY, the $400 in interest you earn in 2024 will be taxable in that year. Interest earned in each of the remaining four years qualifies as income and is taxable in the year it's earned.

Certificates of deposit, or CDs, are attractive savings options because of the higher yields they earn. But what they offer in interest, they often lack in flexibility. You typically can't add money to a CD after opening it and making your initial deposit—but add-on CDs offer an exception to that rule.

For 3-year CDs: 90 days of interest. For 4-year CDs: 120 days of interest. For 5-year CDs: 150 days of interest.