The 5-Year CD: Maximum Lock, Maximum Compounding
Five years is the longest term most banks offer, and it's where compounding does real work. A $10,000 deposit at 4.25% APY grows to about $12,313 — roughly $2,313 in interest, of which about $188 is pure interest-on-interest that a simple-interest account would never pay.
What Can You Earn in 5 Years?
At 4.25% APY: $10,000 → about $12,313; $50,000 → about $61,566; $100,000 → about $123,132. The calculator above computes any combination instantly.
When Locking 5 Years Makes Sense
- Rates look historically high: the 5-year CD is the classic way to freeze a good rate before a cutting cycle. Savers who locked long before past rate drops kept earning top yields for years afterward.
- Ladder top rung: in a mature 5-rung ladder, every reinvestment goes into a new 5-year CD — the strategy is explained in our CD Ladder Calculator.
- Capital preservation: retirement-adjacent money that must not shrink belongs in insured, fixed-rate instruments — this is that instrument.
Think Hard Before You Commit
Early withdrawal penalties on 5-year CDs are the harshest — commonly 12 months of interest, sometimes more. Break one in year one and you can lose principal. If there's any real chance you'll need the money, ladder it instead of locking it all, or split between a 5-year and shorter terms. And always compare against 4-year rates first — sometimes the extra year buys you almost nothing.