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Higher yields on savings won’t last forever, but you can at least lock them in for the next few years. The Federal Reserve indicated Wednesday it would keep interest rates higher for longer, anticipating one more rate hike before the year ends. The central bank also predicted there would be two cuts in 2024 , two fewer than it had forecast previously. The developments bode well for income investors , who are seeing even higher yields on Treasurys, money market funds and certificates of deposit . It also raises an interesting conflict for investors : The richest rates are at the shorter end of the yield curve, but investors willing to commit some of their money can lock in higher rates for a couple of years. The commitment aspect can give some investors cold feet. “It’s funny because people were saying years ago that if they could lock in 5%, they’d do it, and now they can lock it in for three years, five years and they don’t want to do it,” said Jeremy Keil, a certified financial planner at Keil Financial Partners. “It’s been so long since they’ve seen high interest rates, it feels like losing if you go from 5.5% [on a Treasury bill] to 5% on a 3-year CD,” he said. Locking in and trading off Though banks can switch the yields they pay on savings accounts at their discretion, CD rates are locked in until maturity, which can give investors some peace of mind when the Fed begins dialing back its rate policy. Of course, the risk of holding a CD for a few years is that you’re missing opportunities to earn higher returns in the stock market and in fixed income. For instance, in a falling rate environment, a bond portfolio could at least see some price appreciation while a CD would just hold steady. With that said, there are a few places that will offer a decent yield for those who don’t mind giving up some liquidity over the longer term, according to a Thursday report from UBS. For savers with an eye on the 2-year mark, Popular Direct is offering an annual percentage yield of 4.9% . Frost Bank pays 4% APY on 2-year CDs but boosts the rate to 4.4% for clients who are stashing at least $100,000. Bread Financial pays a 5% yield for 2-year CDs. If you’re ready to commit to five years, a handful of banks will pay upward of 4% in yield. Bread offers a 4.5% yield, while Ally Financial pays 4.1%. A 5-year CD at Popular Direct yields 4.65%. — CNBC’s Michael Bloom contributed reporting.
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