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.

How much interest would you earn? If you put $20,000 into a 5-year CD with an interest rate of 4.60%, you'd end the 5-year CD term with $5,043.12 in interest, for a total balance of $25,043.12.

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.

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)

The interest is significant and predictable

Let's say you put $10,000 into a 5-year CD with the rate discussed above – 4.75%. After the 5-year term is up you'll have earned $2,611 in interest for a total account balance of $12,611.

The top nationwide rate in each CD term—from 6 months to 5 years—currently ranges from 5.20% to 6.18% APY. With a $10,000 investment in a top-paying CD, you can earn hundreds to thousands of dollars of interest on your money—and much more than if you keep it in a typical savings account.

First, let's take a look at how much you could earn if you got the national average CD rate. Right now, the average interest rate for a 5-year CD is 1.46%. If you put $10,000 into a CD with that rate right now, after five years you'd have earned $751.63, for a total of $10,751.63.

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.

Banks and credit unions often charge an early withdrawal penalty for taking funds from a CD ahead of its maturity date. This penalty can be a flat fee or a percentage of the interest earned. In some cases, it could even be all the interest earned, negating your efforts to use a CD for savings.

Key takeaways

Interest earned on CDs is considered taxable income by the IRS, regardless of whether the money is received in cash or reinvested. Interest earned on CDs with terms longer than one year must be reported and taxed every year, even if the CD cannot be cashed in until maturity.

This CD will earn $120.39 on $500 over five years, which means your deposit will grow by 24.6%.

So, if you were to put $1,000 into the highest-yielding 5-year CD on our top CDs list, you'd earn a total of $234.31 of interest over the five-year term. At the end of the term, you can either withdraw the balance of $1,234.31, or you could allow your CD to be renewed for another 5-year term at the then-current rate.

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.

A five-year certificate of deposit (CD) might be a good investment if stable, predictable gains sound appealing. A five-year CD allows you to grow your savings at a guaranteed rate, but potential for gains aren't as high as riskier investments.