When you have a lot of money that you’ve managed to save after many years of work and you want to invest it in something that is guaranteed to turn a profit, one of the best investment options you have are certainly CDs. CDs are certificates of deposit and it seems that compared to other investment options they feature an interest rate that is much higher. The secret though lies in the fact that you don't have to touch the money in a CD account until it reaches its maturity date. By doing so, you compromise the interest rate and you'll also be required to pay a certain amount of money as a penalty.
Purchase
First of all, you should know that buying CDs can be achieved by getting in touch with the local credit unions or banks, but you can also get them from various websites on the internet, such as www.cdratesprophet.com. for instance, if you want to invest in a 6 month CD, then you'll generally earn a 2% interest rate, while a 1 year CD can earn you 2.5% interest. Lastly, in good times a 60 month or five years CD will earn you an interest of 5%.
Early withdrawal as currently mentioned will attract a penalty, so you need to have enough money to go about with your daily life before deciding to invest in a CD. Depending on the banks you use, some of them may offer you a jumbo certificate for deposits between 50K dollars and 100K dollars. Naturally, the interest rate for these is going to be higher.
Interest payments
Purchase
First of all, you should know that buying CDs can be achieved by getting in touch with the local credit unions or banks, but you can also get them from various websites on the internet, such as www.cdratesprophet.com. for instance, if you want to invest in a 6 month CD, then you'll generally earn a 2% interest rate, while a 1 year CD can earn you 2.5% interest. Lastly, in good times a 60 month or five years CD will earn you an interest of 5%.
Early withdrawal as currently mentioned will attract a penalty, so you need to have enough money to go about with your daily life before deciding to invest in a CD. Depending on the banks you use, some of them may offer you a jumbo certificate for deposits between 50K dollars and 100K dollars. Naturally, the interest rate for these is going to be higher.
Interest payments
The IRS needs you to report interest in the year it's credit, no matter if you take it or don't take it as cash. As for the interest rate, you can choose to wait until the CD reaches its maturity date and then get the money or receive it on a monthly basis. One thing to keep in mind is that you won't be required by law to pay taxes for the initial cash you invested in the CD, because you already paid taxes on that cash as income. You will only get to pay taxes on the interest you accumulate in the chosen CD timeframe. With that being said, these are the main things you need to know when it comes to investing in a certificate of deposit and the taxes you need to pay for it.
