'She's the queen of CDs': My mother-in-law, 83, opened 12 CDs at different financial institutions. Should I intervene?

By Quentin Fottrell

'Given her advanced age and risk aversion, I question whether pursuing these interest rates and promotional offers is truly worthwhile'

Dear Quentin,

My 83-year-old mother-in-law chases CDs.

She maintains 12 certificates of deposit across various banking institutions, continually transferring funds to optimize interest rates. She's the queen of CDs. She diligently monitors local bank rates and maturity dates, precisely calculating her investments.

Given her advanced age and risk aversion, I question whether pursuing these interest rates and promotional offers is truly worthwhile. And guess who drives her to all these banks? I also drive her to the grocery store, medical appointments and bingo.

Son-in-Law

Related: 'I'm struggling with grief and loss': I inherited seven figures after my parents died young. Why do I feel guilty?

Dear Son-in-Law,

Time for tea - 83!

(That's a bingo call.)

Your mother-in-law is CD-rate-chasing royalty. As "addictions" go, why not one to CD rates, especially if she is in a position to take advantage of promotional rates? It's less risky than opening and closing credit cards - and has less impact on her credit score - and it is certainly healthier than playing blackjack in Las Vegas or pulling the one-armed bandit.

At 83, she should be making sure her cash is safe. Using the pretty reliable, if cliched, rule of "100 minus your age," your mother-in-law should only have around 17% of her portfolio in stocks, with the rest in less risky investments: Treasuries, high-yield savings accounts (whose rates can fluctuate, unlike when she commits to a CD) and, yes, CDs.

Is she doing anyone any harm? Nope. Is, given her age, earning 7% instead of 5% going to make a huge difference to her quality of life? Probably not. But she's clearly financially savvy and she gets a kick out of putting her money to work instead of leaving it sitting in a checking account earning less than 1%. And she's probably been a keen financier her whole life.

It's a boon for her mental and cognitive health. This is a form of cognitive training and will stand her in good stead over the long term. She gets to stay in touch with the whirligig of interest rates and follow the Federal Reserve's latest moves. It keeps her active and engaged with her local community - everyone from you, the person who drives her to her appointments, to the cashiers at the bank.

Looking for a safe haven

You could set her up with online accounts and passwords, but she may still prefer to conduct these transactions in person. After all, part of her CD treasure hunt is probably social as well as financial. It's like a game - a financial orienteering course for a retiree who still has what it takes to get the best rate of return for her cash.

For those readers who are curious about your mother-in-law's habits: Certificates of deposit are investment vehicles with set interest rates and time frames that attract people looking for a safe haven for their cash. CD rates typically track the federal-funds rate, which, after last Wednesday's rate cut, is now in a range of 4.75% to 5%.

Some regional credit unions offer rates that are significantly higher than that, but they are special offers aimed at attracting new customers. You typically must sign up for membership and live in that state, and there are limits on the amount of money you can invest in such CDs. They are a mirage for most people, but your mother-in-law has her ear to the ground.

In September, she can still find CD rates around 5%, which isn't bad. During a period of rising inflation last year, she may have gotten rates of 6%. While rates are still high, your mother-in-law could also consider CD ladders, buying one-, two-, three-, four- and five-year CDs, so that she has one maturing every year.

CD rates will likely go down from here. The Federal Reserve made its biggest cut to the benchmark rate in 16 years on Wednesday, reducing the rate by 50 basis points. It was also the first rate cut in four years. A decreasing interest-rate environment should, eventually, help change the landscape for stocks, but she may be on top of that already.

In any case, the Fed's rate cut won't dull the shine on her CD crown.

The Moneyist regrets he cannot respond to letters individually.

More columns from Quentin Fottrell:

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Our daughter and son-in-law spend money as fast as his parents give it to them. Should we intervene?

I'm a veteran, 53, with 6 degrees and $245,000 in student debt. I plan to discharge my loans due to my disability when I hit $1 million.

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-Quentin Fottrell

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09-25-24 1117ET

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