My CD Just Matured. Now What?

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CDs are sort of like a revolving door. You open one and tie up your money for a period, but eventually, that money is yours to reclaim once your CD matures.

If you have a CD that just came due, you may be wondering what to do with the money. With CD rates being high right now, opening another CD may be tempting.

But should you commit to opening another CD? Or is there a better choice? Ask yourself these questions to find out.

1. Do I have a complete emergency fund outside of my CD?

Since life can be frustratingly expensive out of the blue, and you never know when a surprise home repair or medical bill might arise, it's important to have a fully loaded emergency fund at all times. At a minimum, you should aim for three months of living expenses in savings, as that amount could get you through a period of unemployment.

Maybe you had a complete emergency fund before opening your last CD, only a few months ago, you had to take a withdrawal for a surprise expense. If so, you may want to put the money from your recently matured CD into a regular savings account.

2. Do I have any large expenses coming up?

Maybe you've been hoping to buy some new furniture or take a big trip to celebrate getting your master's degree. Or maybe you're expecting to have to replace your water heater in the coming months.

If you have a large expense coming up soon, whether for a happy reason or not, then you generally don't want to commit your money to a CD. There can be costly penalties for cashing out a CD before it matures, so a savings account is a better place for money you might need within a year.

3. Am I trying to save for a goal that's not too far away?

If you're saving for a goal that's pretty far out -- say, 10 years away or more -- then investing in stocks is generally a smarter move. While many CDs are paying around 5% today, the stock market's average annual return over the past 50 years has been 10%.

This means that if you have $5,000 you're investing for a milestone that's 20 years away, putting it into stocks could grow that sum into about $33,600 (past results do not guarantee future returns). Even if you were to earn 5% in a CD every year for the next 20, that would only turn your $5,000 into about $13,300.

However, if you're saving for a goal that's a couple years away or a bit more, investing in stocks isn't the best idea. You may not have enough time to ride out an extended stock market slump if you're saving for a home renovation you want to do in three or four years.

In that case, a CD could be a great bet. But you may want to favor a longer-term CD, even if it means not getting the best rate available today.

The Federal Reserve is expected to start cutting interest rates at some point this year. Once that happens, CD rates are likely to fall. And while they may not fall so dramatically, if a 36-, 48-, or 60-month CD aligns with your timeline, you may want to choose a CD with one of these terms.

It's important to think carefully about what you want to do with a CD that's just matured. Consider all of these points when making your choice.

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