What to Do with Cash Once Your CD Matures: A Strategic Guide for Smart Savers

You opened a certificate of deposit (CD) when rates were attractive, and now it's maturing. You have a decision to make and it's one that deserves more thought than simply letting it auto-renew.

Whether you're in your prime earning years, transitioning toward retirement, or managing a windfall from a life change like divorce or inheritance, understanding your CD maturity options can help you make the most of your money.

This guide walks through what happens when a CD matures, your reinvestment choices, and how to decide what's right for your financial plan.

What Happens When a CD Matures?

When your CD reaches its maturity date, the bank or credit union returns your principal plus any accrued interest. At that point, you typically have a grace period, usually 7 to 10 days, to decide what to do next.

During the grace period, you can:

• Withdraw your funds penalty-free

• Reinvest in a new CD (often at current rates)

• Move your money to a different account type

• Do nothing and allow the CD to automatically renew

If you don't take action during the grace period, most institutions will automatically roll your CD into a new term at whatever rate they're currently offering, which may be lower than what you originally earned.

Important: Once the grace period ends and the CD renews, withdrawing early typically triggers a penalty (often several months' worth of interest).

Your CD Maturity Options: A Clear Breakdown

Option 1: Reinvest in a New CD

If you don't need immediate access to the cash and current CD rates are competitive, reinvesting can make sense. You lock in a new rate for a set term and continue earning predictable, FDIC-insured returns.

When this works:

• Current rates are equal to or better than your maturing CD

• You have other liquid savings for emergencies

• You're comfortable with the term length (6 months to 5 years)

Watch out for: Lower rates than your original CD, or tying up money you might need sooner than expected.

Option 2: Build a CD Ladder

A CD ladder is a strategy where you divide your money across multiple CDs with staggered maturity dates. For example, instead of putting $25,000 into one 5-year CD, you might open five CDs of $5,000 each, maturing in 1, 2, 3, 4, and 5 years.

Why this works:

• You gain access to a portion of your funds each year

• You reduce interest rate risk by not locking everything in at once

• You maintain higher average returns than keeping everything in savings

  
  

As each CD matures, you can either withdraw the funds or reinvest at the current rate for a new 5-year term, keeping the ladder going.

Option 3: Move to a High-Yield Savings Account or Money Market

If you value flexibility over maximizing returns, moving your matured CD into a high-yield savings account or money market account can be a smart move.

When this makes sense:

• You might need the money within the next 6–12 months

• Interest rates are rising and you want to avoid locking in a lower CD rate

• You're building or replenishing your emergency fund

• You're in a transition period (career change, pending home purchase, divorce settlement)

Today's high-yield savings accounts often offer competitive rates without the commitment or penalties of a CD.

Option 4: Invest for Growth

If your CD was part of a longer-term savings strategy and you don't need the funds soon, you might consider moving some or all of it into investments like stocks, bonds, or a diversified portfolio.

When this could work:

• You have a solid emergency fund in place (3–6 months of expenses)

• Your time horizon is 5+ years

• You're comfortable with market fluctuations

• You're saving for retirement or other long-term goals

Caution: Unlike CDs, investments are not FDIC-insured and carry the risk of loss. This option is best suited for money you won't need in the short term.

You might also consider using matured CD proceeds to fund or top off retirement accounts like a Roth IRA or 401(k), especially if you have contribution room and want to take advantage of tax-deferred or tax-free growth.

Option 5: Use It Strategically

Sometimes the best use of matured CD funds is tactical, paying off high-interest debt, funding a home improvement that adds value, or covering a major planned expense like a wedding or education costs.

Consider this option if:

• You're carrying credit card debt or other high-interest loans

• You have a specific goal or purchase planned within the next year

• The opportunity cost of keeping the money in a CD outweighs the interest earned

How to Decide What's Right for You

Here's a simple framework to guide your decision:

Step 1: Assess your liquidity needs Do you have an adequate emergency fund? Will you need this money in the next 1–2 years?

Step 2: Compare current CD rates to alternatives Are new CD rates competitive? How do they compare to high-yield savings, money markets, or short-term bonds?

Step 3: Evaluate your overall financial plan Where does this money fit in your bigger picture? Are you saving for retirement, a home, or simply preserving wealth?

Step 4: Consider your timeline and risk tolerance Are you comfortable with market risk, or do you prefer the safety and predictability of FDIC-insured options?

Step 5: Act during the grace period Don't let inertia make the decision for you. Mark your calendar and set a reminder before your CD's maturity date.

Common Mistakes to Avoid

Letting your CD auto-renew without reviewing rates. You might lock in a lower rate than what's available elsewhere.

Withdrawing early and paying penalties. Plan ahead so you can access funds during the grace period.

Ignoring inflation. If your CD rate doesn't keep pace with inflation, your purchasing power erodes over time.

Forgetting to diversify. Keeping too much in CDs, especially in a rising rate environment, can limit your financial flexibility and growth potential.

Not shopping around. Banks and credit unions vary widely in the rates they offer. A quick comparison can sometimes boost your return significantly.

Frequently Asked Questions

What is the grace period for a maturing CD? 

Most financial institutions provide a 7- to 10-day grace period after maturity during which you can withdraw or reinvest your funds without penalty. Check your CD's terms to confirm.

Can I withdraw my CD at maturity without penalty? 

Yes. During the grace period, you can withdraw your principal and interest with no early withdrawal penalty. After the grace period, if the CD has renewed, early withdrawal penalties typically apply.

Should I roll over my CD or move to a high-yield savings account? 

It depends on your goals. If you won't need the money soon and current CD rates are attractive, rolling over makes sense. If you need flexibility or rates are rising, a high-yield savings account may be better.

How does a CD ladder work? 

A CD ladder spreads your money across multiple CDs with different maturity dates. This gives you regular access to portions of your savings while maintaining higher average interest rates than a single savings account.

Can I use matured CD funds to contribute to my IRA or 401(k)? 

Yes, as long as you meet IRA or 401(k) contribution requirements and limits. This can be a smart way to move money from a taxable CD into a tax-advantaged retirement account.

What happens if I do nothing when my CD matures? 

Most institutions automatically renew your CD at the current rate for a similar term. This may or may not be in your best interest, especially if rates have dropped or your needs have changed.

Final Thoughts

A maturing CD isn't just a renewal notice, it's a financial checkpoint. It's an opportunity to reassess your goals, compare your options, and make an intentional choice about where your money goes next.

Whether you reinvest, ladder, move to savings, or invest for growth, the key is making a decision that aligns with your broader financial plan and life stage.

At Life Story Financial, we help clients navigate these decisions with clarity and confidence. If you're approaching a CD maturity or managing cash from a life transition, we'd be glad to help you evaluate your options.