Are low rates a time to shorten CD ladder?

Christopher Reilly, senior vice president at Philadelphia-based Firstrust Financial Resources, says consumers could consider other fixed income securities, such as high-quality, intermediate corporate bonds, to get a boost in yield if they can do without the FDIC guarantee. But, if you stick with CDs, let the maturities run.

"If all of your maturities are less than 12 months, you might find that 12 months from now we're in the same situation. You locked in at 2.5 percent or 3.5 percent and you have to reinvest at similar rates. You're going to wish you had some CDs on the longer end, maybe five years."

If you want to ladder corporate bonds, consider corporate note programs, which are offered at most brokerages. These bonds sell for $1,000 each and can be easily laddered. A new list of notes is published weekly -- here's a look at what is being offered at Fidelity through its CorporateNotes Program. Maturities, in this offering, stretch from 18 months to 30 years. These bonds are investment grade, but there is always the risk of default with any bond purchase. Again, there is no FDIC insurance.

If you opt for a CD ladder, look for the highest yields you can find for each maturity. Certainly, it's more convenient to have all your CDs at one bank, but it's highly unlikely that you'll get the best return.

Research CD rates at various banks on your own or use Bankrate's high-yield database to put together a better yielding ladder than you'd get with standard CD rates. As of this writing, the best of the high-yield CDs are ranging from 4.5 percent for a one-year CD to 5.35 percent for a five-year maturity. Average yields for standard CDs are ranging from 2.4 percent for one year to 3.56 percent for five years.


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