Opening a certificate of deposit (CD) means committing your money for a set period in exchange for accrued interest. When the growth period ends, your account has reached maturity, meaning you gain access to both your original investment and earned interest.

Understanding how CD maturity works is vital to making the most of this savings tool. This article explores what it means when a CD matures and outlines potential strategies to maximize your returns.

How do CDs work?

When you open a CD with a bank or credit union, your investment has a fixed term, typically ranging from a few months to several years. Once the account matures, the CD stops earning the original interest rate, and you can withdraw or reinvest the account balance. 

A key feature to consider is the grace period, usually a seven to 10-day window when you can decide what to do with your funds without facing penalties. If you don’t take action within this timeframe, most banks will automatically renew your CD for the same term at the current market interest rate. Taking your money out of the account after renewal will likely result in additional fees.

The grace period offers valuable flexibility, allowing you to evaluate your options and make the best decision. Here are a few options for what to do when a CD matures.

Withdraw funds

The most straightforward choice is cashing out a CD at maturity, which includes withdrawing your principal investment and interest. You might choose to cash out because you need the money for an upcoming expense or want to reallocate it.

Taking out your funds during the grace period ensures you receive the full value of your CD without incurring any penalties. But any interest earned is taxable as ordinary income in the year received.

Reinvest in a new CD

If you don’t need immediate access to your funds, reinvesting in a new CD could be a good option to continue growing your money securely. 

Don’t assume your current bank will offer the best rate or term lengths — it’s smart to shop around and compare, as other banks or credit unions might offer higher returns. If you want the guaranteed returns of a CD but don’t want to lose access to your funds for long periods, spreading your investment across a CD ladder with staggered maturity dates offers predictable liquidity. 

Transfer money to another account

Market conditions and financial goals can change significantly during a CD term, so you may want to change your investment when it matures. If you want to pursue higher growth potential, you could transfer the money to a different type of account, such as a high-yield savings account or an annuity. Reinvesting can let you take advantage of higher interest rates or tax advantages and keep your money working for you.

3 things to look out for when a CD reaches maturity

To avoid costly mistakes and maximize your savings, it’s important to be proactive as a CD approaches maturity. Here are three factors to consider.

1. Understanding the grace period

The grace period is a limited window for taking action. A CD doesn’t usually continue to earn interest after maturity, so your money will likely stop earning interest during the grace period. Missing the deadline can result in an automatic renewal at a lower interest rate or penalties if you try to withdraw the funds later. 

Mark your CD’s maturity date on your calendar when you sign up or when your bank notifies you of its pending maturity. Setting reminders well in advance ensures you have time to evaluate your options and take action before the grace period expires.

2. Reviewing and comparing rates

Interest rates fluctuate with market conditions, so never assume your bank’s automatic renewal rate is the best available. When your CD matures, take the time to review the rates on offer at other institutions before making a decision. Even a minor difference in interest rates can compound significantly over time, especially with larger balances, so stay informed and compare options — a little research can go a long way.

Planning for withdrawals or reinvestment

Whether you plan to withdraw your funds, reinvest in a new CD, or transfer the money elsewhere, having a clear plan prevents rushed decisions that might not be in your best financial interest. Assess your short and long-term needs to select an option that provides the liquidity and growth you want.

If you need the funds immediately, initiate the withdrawal process within the grace period. But if you're moving the funds elsewhere, research alternative accounts to understand any potential fees or requirements associated with the transfer. When reinvesting in a CD, choose a term that aligns with your future financial needs and compare the available rates.

Maximizing returns after CD maturity

When deciding next steps after your CD matures, weigh factors like liquidity, risk, and tax implications.

If you want to maintain the predictability and security of a CD while potentially earning a higher rate of return,you may want to consider investing in an annuity could be a smart move. Innovative products like Gainbridge’s FastBreak™ is designed for savers who value stability but want to make their money work harder. It may provides more flexibility than most CDs, offering:

• Competitive rates, up to four times the national CD average
• Customizable terms, such as 3 or 5-year options
• Penalty-free withdrawals under certain conditions
• Tax-deferred growth, letting your funds grow faster
• Guaranteed growth for peace of mind
• No hidden fees, so you keep everything you earn

Some of the differences include the offeror of the product, a CD is offered by a bank or a credit union, whereas an annuity is offered by an insurance company. CDs are also insured by the FDIC, where a fixed annuity is backed by the financial strength and claims paying ability of the issuing insurance company.

Make your savings work harder with Gainbridge

Don't let your savings stagnate after your CD matures — take control of your future. Our innovative platform lets you create an investment strategy tailored to your financial goals, with no hidden fees or commissions. Annuities like FastBreak™ make investing simple while helping you maximize your income.

Unlock your savings’ full potential with Gainbridge.

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This article is intended for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. The GainbridgeⓇ digital platform provides informational and educational resources intended only for self-directed purposes.

Guarantees are subject to the financial strength and claims paying ability of the issuing insurance company. Annuities are issued by Gainbridge Life Insurance Company, located in Zionsville, Indiana. Annuities are long-term investment vehicles and contain terms for keeping them in force.