October is one of the biggest months for CD renewals. Despite low returns, untold amounts of money will roll back into CDs. This means lower spending power for those who rely on CDs for savings vehicles. So why are so many consumers willing to renew rather than replace?
Reasons for Renewal
Simply put, it’s convenient to let a CD roll over when it matures. Renewal requires no action from the consumer. While inconsistent interest rates and tax liability suggest that an alternative product would better suit their needs, many opt to let their money automatically roll over into a new CD. Easy, but probably not ideal.
CDs also provide safety. For those who prefer a low-to-no-risk place to hold their funds, CDs might be the way to go. It’s difficult to lose money on a CD, and that peace of mind can be valuable. Especially when you consider how rocky the market has been lately. CDs also offer better returns than a savings account, which can be appealing to risk-averse savers who want a safe harbor for their money.
While interest rates on CDs have been trending higher than normal, there are better options out there. Anyone still holding their retirement funds in a CD is missing out on alternative vehicles that are likely to perform much better.
The Replacement Conversation
A recent Marketing Corner post listed several reasons for finding alternatives to Certificates of Deposit. Given that this is CD Replacement Month, you’re probably already having this conversation with clients and prospects. If not, there’s still time to get your hands on the resources that can help drive the discussion.
The IAMS 2023 CD Replacement Kit is a must-have for producers during this time of year. It includes:
- 2023 Taxable Equivalent Yield chart
- A split-annuity alternative guide and checklist
- CD vs. FIA sales strategies
- An SPL vs. CD calculator
- Prospecting letters, a fillable fact finder, social cards, and post copy
- Going Broke Safely and Market Loss Recovery concepts
- IAMS’ Beyond Capital Transfer guide