A Slightly Higher Yield March 15, 2002February 21, 2017 Steve Reynolds: ‘Given the current rate for 5 year CDs at my local bank (3.15%) and the current stock market climate, what should a 59-year-old do with qualified cash that will be needed in 5 years? Fixed 5 year annuities are at 5.15% with a 5 year surrender period (no loads). NOW should I buy one?’ ☞ The most obvious way to beat your bank is a 5-year treasury note, currently yielding 4.34%, and subject only to federal (not state) taxes. I’d prefer this to the annuity (which after state tax might amount to about the same yield) because it gives you the flexibility to cash out early (with a small profit, no less, as you roll down the yield curve) without a surrender charge. You could also visit bankrate.com and rate.net to find CD’s that offer much better rates than you’re being offered. Or you could twist your broker’s arm to buy you TIPS, which would yield a bit more than 3% on top of inflation. You’d have to pay tax on the inflation adjustment each year, even though you didn’t get it, but for such a relatively short period of time, I can think of worse things. Are you sure you will need all this money in five years? Are will you just begin to need it then, and draw on it for 20 or 30 years thereafter? If the latter, consider a somewhat more aggressive strategy (and buy some TIPS, but for your tax-sheltered retirement plan). Have a good weekend!