Submitted by Rattingaroundd t3_11ehosw in personalfinance
what's a good amount to put into CDs?
I have around 80k in my savings at the moment and I am considering a year long CD for %5 What would be a good amount to place in there?
Comments
_Nuba_ t1_jae2n3k wrote
What is the plan for the money? When do you need the money? Those questions matter more. If you don’t need the money any time soon it should be invested.
Rattingaroundd OP t1_jae37w0 wrote
I'm not sure what you mean
Rattingaroundd OP t1_jae39u6 wrote
Not really. I plan to move apartments in a few months but that's pretty much it
_Nuba_ t1_jae45a7 wrote
You are probably holding too much cash, you should follow the flow chart in the wiki here.
MGK_1223 t1_jae54ry wrote
An alternative to investing in CDs is investing in Treasury bills (can do through Treasury Direct or your brokerage account). Currently, the annualized yield for a Treasury bill is higher than the 5% you're seeing for a CD (the 6-month one is 5.11% on Schwab for example). And while interest on CDs is taxable at the federal and state level, interest on Treasury bills is exempt from state and local taxes. Could be advantageous if you live in a high income tax state.
MGK_1223 t1_jae5o2b wrote
You'd want to keep a portion in an emergency fund though. Size of that fund is up to you and based on your typical monthly expenses (general rule of thumb is emergency fund would last you ~3-6 months). Then can invest the rest.
nozzery t1_jae2mnc wrote
If you pay state income tax, $0, because you can make more yield on <1yr TBills due to there being no state tax on tbills. A 1mo Tbill earns 4.6%, which is 5.11% effective yield if you have 10% state tax (do the match for your own situation).