A 100-year CD brings new meaning to the concept of long-term investing. Is it a good idea?

A 100-year CD presents an intriguing option for long-term investors. With interest rates expected to decrease later this year, savers may be tempted to secure high rates for an extended period.

However, the question remains: is 100 years too long?

Walden Mutual Bank, based in Concord, New Hampshire, is offering a 100-year Local Impact Certificate of Deposit (CD) with a fixed 4.75% annual interest rate. This CD is available to anyone with $1,000 to $150,000 to invest and is FDIC insured up to $250,000. The unique aspect of this CD is that it allows individuals to invest alongside Walden and support local agriculture, specifically lending to food and agriculture businesses in New England and New York.

Mary Grace Roske, spokeswoman at CD rates comparison site CDValet.com, describes this offering as unprecedented. While five-year and ten-year CDs are common and rare, respectively, a 100-year CD is truly one-of-a-kind. Roske sees it as an opportunity for individuals to align their values, such as environmental responsibility, with their savings, presenting a creative spin on socially responsible investing.

Here are the key details of the 100-year CD:

  • Minimum investment of $1,000 up to $150,000 per individual or organization
  • Fixed 4.75% annual percentage yield (APY) for the entire 100-year duration
  • FDIC insurance up to $250,000
  • A completed beneficiary form is mandatory at account opening
  • Withdrawal of the entire deposit is possible at any time, but a penalty of 10 years’ interest will be applied. If the CD is withdrawn before 10 years, the penalty will reduce the principal value.

Investing in a 100-year CD is an unprecedented venture, and savers must carefully consider their financial goals and timeline before committing to such a long-term investment.
The 100-year CD offered by Walden Mutual Bank allows for penalty-free withdrawal of interest at any time, either automatically or upon request. After approximately 15 years, over half of your deposit will be in the form of interest, which can be withdrawn without penalty. For instance, if you were to purchase a $1,000 CD and withdraw it after 20 years, you would receive $1,942, equivalent to an effective interest rate of 3.32%. It’s important to note that partial withdrawal of principal is not allowed and only the holder can redeem the bond early.

Walden Mutual Bank is a certified B-corporation, which means it is a for-profit corporation with a social impact. It is a mutual savings bank, meaning it is owned by its depositors rather than shareholders. Walden’s focus is on serving farms, food businesses, sustainability-related businesses, and nonprofit organizations.

Founded in 2022, Walden aims to be an online bank catering to individuals involved in local food production and consumption. CEO Charley Cummings has a unique background combining a business degree with experience in agriculture, having started a meat Community Supported Agriculture (CSA) program. The bank’s 100-year CD allows them to offer longer-term loans to local agricultural businesses, enabling them to manage their balance sheet effectively.

As for whether the 100-year CD is a good investment, it would depend on an individual’s financial goals and risk tolerance. It offers the advantage of penalty-free interest withdrawal and potentially higher returns over a long period. However, it also requires a long-term commitment and limits access to the principal. Investors should carefully consider their own circumstances and consult with a financial advisor before making any investment decisions.
According to Walden, the 100-year CD can be a valuable addition to a Donor Advised Fund, a charitable giving strategy, or a trust aimed at benefiting future generations. However, it can also serve as an attractive fixed income option for individuals and organizations, even if not held until maturity.

But if your primary goal is to maximize returns, some advisors suggest exploring other options. Here’s why:

  1. Interest rates may surpass the fixed 4.75% rate of the 100-year CD, resulting in missed opportunities for higher returns.
  2. Historically, the broad S&P 500 stock index has provided an average annual return of 8-10% over the last century.
  3. There is a significant early withdrawal penalty for the 100-year CD, which includes 10 years of interest and may even result in a loss of principal if withdrawn before 10 years. Other CDs only lose interest in such cases.
  4. While the CD is covered by the FDIC, Walden Mutual’s short operating history may pose a risk if the institution were to close.
  5. There could be potential tax complications associated with reporting CD interest for a century. Beneficiaries would have to pay taxes yearly on their share of the interest after the original owner passes away. This may become challenging if there are multiple beneficiaries with conflicting preferences. However, charities would not have to worry about this issue.

So, who is the ideal investor for a 100-year CD? According to Roske, it is a conservative strategy that can be incorporated into a charitable giving plan or a trust designed to benefit future generations. While there are more profitable investment options available, the 100-year CD appeals to a growing number of people who embrace the “think globally, act locally” mindset.
Medora Lee, a reporter at USA TODAY specializing in money, markets, and personal finance, explores the concept of long-term investing through a 100-year CD. In her article, she discusses whether this strategy is a wise choice. For more personal finance tips and business news, subscribe to our free Daily Money newsletter, delivered every Monday through Friday morning.