For the past two years, savers have enjoyed something that seemed impossible for most of the 2010s: meaningful returns on cash. High-yield savings accounts and certificates of deposit offered yields above 5%, rewarding patience over speculation.

That era is ending. The Federal Reserve has already cut interest rates three times since September, and markets expect additional cuts in 2026. For savers, the message is clear: the window to lock in attractive CD yields is closing fast.

Where CD Rates Stand Today

As of January 2026, the best CD rates still exceed 4%—but just barely. Here's the current landscape:

  • 3-month CDs: Citibank leads with 4.18% APY, though rates vary by location.
  • 6-month CDs: Northern Bank Direct offers 4.15% APY, while Bread Savings and Marcus by Goldman Sachs provide 4.05% APY.
  • 1-year CDs: Marcus by Goldman Sachs offers 4.00% APY with a $500 minimum deposit.
  • 2-year CDs: America First Credit Union stands out at 4.05% APY.

These rates have already fallen from peaks above 5% reached in 2024. And with each Fed rate cut, they'll likely fall further.

The Fed's Path Forward

The Federal Reserve has reduced the federal funds rate by 75 basis points since September, bringing it to a range of 3.5% to 3.75%. Markets expect at least two additional cuts in 2026, which would push benchmark rates toward 3%.

CD rates typically track the federal funds rate with a modest lag. As the Fed continues easing, banks will follow, reducing the yields they offer on deposit products.

The math is straightforward: a 4% CD locked in today will continue earning 4% regardless of what happens to benchmark rates. A savings account yielding 4% today could be yielding 3% or less by year-end.

Why CDs Make Sense Now

Certificates of deposit offer a unique advantage in a falling-rate environment: certainty. Once you open a CD, the APY is locked for the entire term. Whether the Fed cuts rates once, twice, or five more times, your yield remains fixed.

This certainty carries particular value for:

  • Retirees: Predictable income matters more than potential upside for those living off savings.
  • Conservative investors: CDs provide guaranteed returns without market risk.
  • Emergency fund holders: Knowing exactly what your cash will earn simplifies financial planning.
  • Short-term savers: Those with upcoming expenses (home down payment, tuition, etc.) can match CD terms to their timeline.

CDs vs. High-Yield Savings Accounts

High-yield savings accounts currently offer competitive rates—Varo Money leads at 5.00% APY, with Newtek Bank at 4.35% and Axos Bank at 4.31%. So why bother with CDs?

The key difference is variability. Savings account rates float with benchmark rates. That 5% yield could become 3.5% by December if the Fed cuts aggressively. CD rates, by contrast, are contractually fixed.

The trade-off is liquidity. Savings accounts allow unlimited withdrawals (within federal limits), while CDs typically impose early withdrawal penalties. Choose based on your access needs.

Building a CD Ladder

Rather than putting all your cash into a single CD, consider building a ladder—a strategy that balances yield, liquidity, and rate exposure.

Here's how it works:

  1. Divide your savings into equal portions (e.g., five chunks).
  2. Purchase CDs with staggered maturities (e.g., 6-month, 1-year, 18-month, 2-year, 3-year).
  3. As each CD matures, reinvest in the longest term of your ladder.

The ladder approach provides regular liquidity while capturing higher yields on longer-term CDs. It also protects against rate volatility—if rates rise unexpectedly, maturing CDs can be reinvested at higher yields.

Best Practices for CD Shoppers

Maximizing CD returns requires attention to detail:

  • Compare online banks: Online-only institutions typically offer higher yields than brick-and-mortar banks due to lower overhead costs.
  • Check credit unions: Member-owned credit unions often match or beat online bank rates. Membership requirements have become increasingly easy to meet.
  • Understand penalties: Early withdrawal penalties vary significantly. Some CDs charge 90 days' interest; others charge a full year. Know the terms before committing.
  • Consider no-penalty CDs: Some institutions offer CDs without early withdrawal penalties, though typically at slightly lower rates.
  • Verify FDIC/NCUA coverage: Ensure deposits are federally insured up to $250,000 per depositor, per institution.

Promotional Rates: Proceed With Caution

Some banks advertise eye-catching promotional rates that come with strings attached. FourLeaf Credit Union, for example, offers a HELOC APR of 5.99% for 12 months—but that's an introductory rate that converts to a variable rate afterward.

When evaluating promotions:

  • Read the fine print on rate adjustments.
  • Understand what happens after the promotional period.
  • Calculate the true return over your intended holding period.

Tax Considerations

CD interest is taxable as ordinary income in the year it's earned. For investors in higher tax brackets, this can significantly reduce after-tax returns.

Consider these tax-efficient strategies:

  • Use tax-advantaged accounts: CDs held in IRAs grow tax-deferred (traditional) or tax-free (Roth).
  • Mind your bracket: If you're close to a bracket threshold, spreading CD purchases across tax years can optimize your tax situation.
  • Compare to municipal bonds: For high earners, tax-exempt municipal bonds may provide better after-tax yields despite lower stated rates.

The Opportunity Cost Question

Critics argue that locking money in CDs means missing out on stock market returns. And historically, equities have outperformed cash over long periods.

But that argument assumes all money should be invested in stocks—a premise that doesn't hold for everyone. Emergency funds, short-term savings, and conservative portfolio allocations all belong in safer vehicles.

A 4% CD isn't competing with the stock market. It's competing with a 2% or 3% CD that you'll be offered six months from now. Viewed through that lens, today's rates look considerably more attractive.

The Bottom Line

The golden age of high-yield savings is drawing to a close. Federal Reserve rate cuts have already begun, and more are expected. For savers who've grown accustomed to 4%+ yields, the window to lock in those rates is narrowing.

CDs offer a solution: fixed yields that persist regardless of Fed policy changes. While they sacrifice some liquidity, the certainty they provide has real value in a falling-rate environment.

If you've been procrastinating on putting your cash to work, now is the time to act. Today's 4% CD will look increasingly attractive as benchmark rates continue their descent. Don't let analysis paralysis cost you returns that will soon be gone for good.