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.

CD rates are at a 3-year high—but waiting longer to buy could be a gamble. Interest rates on certificates of deposits (CDs) have been increasing substantially since 2022—in lock-step with the Fed's rate hikes. The national deposit rate for 5-year CDs is 1.39%, up from less than 0.50% in June 2022.

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.

What is the interest on $20000 at 5%? ›

Loan amount

If you borrow $20,000 over five years with a 5 percent interest rate, you'll pay $2,645.48 in interest on an amortized schedule.

Summary. Retiring with $200,000 in savings will roughly equate to $10,000 annual income. If you choose to retire early, you will need additional savings in order to have a comfortable retirement.

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.

High-yield savings accounts

The best online banks offer APYs of 5.00% or more. If you deposit $500 in a high-yield savings account with a 5.00% APY, you could earn as much as $142 over five years — assuming you don't make anymore deposits and that the APY stays the same.

With a five-year CD, you risk restricting your money for a really long time -- a lot can change for you in five years. Because interest rates won't stay as high as they are right now forever, it's a good time to lock in a longer-term CD.

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.

Unlike traditional or high-yield savings accounts, which have variable APYs, most CDs lock your money into a fixed interest rate the day you open the account. That's why if you suspect that interest rates will soon drop, it can be a good idea to put money in a CD to preserve the high APY you would earn.