CDs allow you to earn more by locking your money away. You might agree to leave funds at the bank for three months, one year, or 5 years.
You generally earn more by committing to a longer term CD. But how confident are you that things won't change over 5 years?
The longer the term, the more uncertainty there is. Unfortunately CD investors are not looking for uncertainty.
Banks have been known to close CD accounts and make changes to long term CDs, and customers are usually surprised. The rules may allow them to change things, but most people never expect it to happen. DepositAccounts reviews a few examples of banks closing CDs, and notes that there's very little you can do. According to Ken:
"There have been a lot of new regulations this year to protect borrowers, but nothing for savers."
If you're going to invest in long term CDs, consider the possibility that things might change. How would this affect you and your goals -- will it be a mild annoyance or will it knock you off track?
Further reading: