Savers may want to keep their interest rates high for a long time before they are likely to fall later this year.
But is 100 years too long?
Concord, New Hampshire-based Walden Mutual Bank is finding out. This financial institution offers his 100-year Local Impact Certificate of Deposit (CD) at a fixed rate of 4.75% per annum.
This CD allows anyone to invest from $1,000 up to $150,000 and is insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). The bank says the CD will allow people to invest with Walden to support local agriculture, providing financing to food and agriculture businesses, particularly in New England and New York.
“CDs with a five-year shelf life are common, but CDs with a 10-year shelf life are rare, and CDs with a 100-year shelf life are unique,” said Mary Grace Roske, a spokeswoman for the CD price comparison site CDValet.com. says. She says, “Walden Mutual has created a unique opportunity for people who want to align their savings with their values, in this case environmental responsibility. This is a creative approach to socially responsible investing. That’s a twist.”
learn more: Current highest CD rate
What is a 100-year CD?
Here are the details:
- Minimum investment amount per person or organization is $1,000 up to $150,000.
- Fixed 4.75% APY for 100 year life of CD
- FDIC insurance up to $250,000
- A beneficiary form must be filled out when opening an account.
- You can withdraw your entire deposit at any time upon request, but you will be charged 10 years of interest. If he withdraws his CD 10 years ago, the penalty will reduce the principal value of his CD.
- Interest paid can be withdrawn at any time automatically or upon request without penalty. After about 15 years, more than half of your savings will earn you interest and can be withdrawn on demand without penalty. For example, if you purchase a CD for $1,000 and withdraw it after 20 years, you will receive an effective interest rate of $1,942, or 3.32%.
- Partial withdrawal of principal is not permitted.
- Bank claims cannot be made. This means that only the holder can redeem the bond early.
What is Walden Mutual Bank?
Walden is a mutual savings bank and a Certified B Corporation, a for-profit corporation with social impact certification. According to CDValet.com, Walden’s is focused on serving farms, food businesses, sustainability businesses, and nonprofit organizations.
Walden said the company is a mutual bank, meaning it has no shareholders and is owned by depositors.
Walden was founded in 2022 as an “online bank for people who eat, make, grow, cook, and love local food,” the company’s 2022 annual report states.
Chief executive Charlie Cummings combined his business degree with a background in agriculture to start Meat Community Supported Agriculture (CSA), which allows consumers to pre-purchase a share of a farm’s harvest.
Why 100 years CD?
Walden said the 100-year CD will provide long-term financing to local agricultural businesses.
For example, “a low-margin farm may not be able to support a 10-year mortgage payment on the farmland, but if that term is extended to 30 years, the payments could be manageable,” Walden said. Ta. “To support these long-term loans, we need long-term deposits to be able to properly manage our balance sheets.”
Is a 100-year CD a good investment?
Walden says, “CDs are suitable as an addition to a donor-advised fund as part of a charitable giving strategy, or a trust for the benefit of future generations, but they are also attractive to individuals and organizations. It is also an alternative to bonds if they are not held to maturity.
But if you’re just looking to maximize returns, some advisors say look elsewhere. Here’s why:
- Roethke said interest rates could rise above the 100-year CD’s fixed rate of 4.75% and he would lose money.
- The broad stocks in the S&P 500 stock index have returned an average of 8% to 10% annually over the past century.
- Hefty early withdrawal penalties of 10 years of interest (which may include loss of principal if less than 10 years). “Other CDs just make you lose interest,” said Steve Azzury, founder of Azzury Financial.
- Walden Mutual has been in business for a short time, Azzury said. “CD is subject to the FDIC, but if (Walden) shuts down, there could be major problems.”
- Azzury said reporting interest on CDs for a century can be a tax headache. After the original owner dies, the beneficiary must pay taxes on a portion of the interest each year. “And what if you have multiple beneficiaries and one person wants to cash it in and the other doesn’t?” But charities don’t have to worry about that. there is no.
Saver’s Joy:Want to give CDs a try? Certificate of deposit interest rates are at their highest in years
Who is the right investor for the CD of the century?
“This is a conservative strategy to incorporate into charitable giving plans and trusts intended to benefit future generations,” Roethke said. “Of course, there are more profitable ways to invest, but the 100-year CD reflects a growing number of people’s ‘think globally, act locally’ mindset.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday to Friday morning.
