CD Rates: Your Actual Rate of Return on a CD Investment These Days

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cd-rates-your-actual-rate-of-return-on-a-cd-investment-these-daysCD Rates: Finding decent CD rates is challenging these days, when you factor in the rate of inflation the return isn't as bad as it seems.

This week, 12 month CD rates are averaging just 1.41 percent. Factor in the rate of inflation, which has fallen 0.7 percent ( Bureau of Labor Statistics' CPI-U) over the last 12 months the rate of return is a little better.

You can find 12 month CD rates higher than the national average of 1.41 percent which makes your return even better. Search for the best CD rates in your area.

As long as your investment returns are higher than the rate of inflation you will be in good shape in the long run, stuffing your money under a mattress is  never a good investment. Though I have to admit, last fall during those scary times when several large banks were failing the thought of stuffing my money under a mattress was very appealing.

Since the rate of inflation is down over the past 12 months your buying power has increased this year over last. $9,904.18 buys the same amount of goods and services in 2009 that $10,000 bought in 2008 ( CPI Inflation Calculator). The 0.7 percent decline in inflation is mainly due to a 25 percent drop in energy prices. Remove energy and food from the index and prices have actually gone up 1.9 percent. Though who doesn't use food and energy? Outside of housing costs food and energy make up a big part of expenses.

When your certificate of deposit matures and you start searching those pathetic CD rates just think about the rate of inflation and the buying power of your dollars. You'll probably feel a little better about the rate of return.
Author: Brian McKay
May 27th, 2009