Liquid CDs

A liquid CD is a type of certificate of deposit that allows you to access your money before the CD matures without facing a penalty. Similar to traditional CDs, you deposit a set amount into your liquid CD, which grows at a fixed interest rate until it matures.

While liquid CDs offer easy access, you should still wait at least six days after your deposit to access your funds, according to the Office of the Comptroller of the Currency. Even with a liquid CD, you could face a penalty if you tap into your CD within the first six days.

As long as your issuer is NCUA or FDIC insured, your liquid CD will be insured for up to $250,000. If you want a flexible and insured investment vehicle in your retirement plan, a liquid CD allows guaranteed growth with the ease of accessing your money without facing a penalty.

Liquid CDs minimize the risk of penalties if you need to access your funds before your CD matures. They act as an enhancement to traditional CDs by offering more liquidity.

Liquidity is the ability to convert your assets into cash or acquire cash quickly. While traditional CDs are typically locked up and remain untouched until maturity, liquid CDs allow you to move your money without risking penalties.

If you’re interested in investing in liquid CDs, you should follow these four preparation steps to avoid making an investment mistake.

To start the withdrawal process, you’ll need to contact whoever issued your liquid CD. They can confirm whether your withdrawal will be penalty-free.

Remember that some issuers put limits on how often you can withdraw from your CD. For example, the California Coast Credit Union allows only one penalty-free withdrawal, while MyPoint Credit Union allows six penalty-free withdrawals a month.

Some issuers have rules on how much you can withdraw from your liquid CD. With Ally Bank, you can’t just take out a portion of the funds in your liquid CD — you’re required to take out the whole amount if you need to access your money early.

Your issuing bank or credit union can help walk you through the steps of withdrawal for your liquid CD.

If you’re looking for a short-term CD with moderate interest rates and high liquidity, then investing in a liquid CD would likely fit your retirement investment plan. They are a FDIC- or NCUA-insured financial products with guaranteed returns, so they offer little to no risk.

Still, you should consider the pros and cons of investing in liquid CDs before securing your investment.

Compare a liquid CD to other investment options, like a traditional savings account, high-yield savings account, money market account and CD ladders, to ensure you’re getting the best financial vehicle to grow your retirement savings.

The main features to compare are each investment’s liquidity and rates.