When CDs Aren’t a Strategy: Rethinking Fixed Income Strategy
Peter came to our office with a sense of accomplishment. He was in his late 60s, retired, and proud to show me how he had spread his cash across more than a dozen banks—each account filled just shy of the FDIC limit. Every CD had a yield north of 5%, and he had carefully staggered their maturities. It was organized, it was conservative, and it was yielding nicely.
But when I asked, “How does this fit into the rest of your financial plan?”—Peter didn’t have an answer. There wasn’t one. Just a collection of deposit slips and interest rate renewals. No alignment with his income needs, tax planning, or broader investment strategy. In Peter’s words, “I didn’t want to lose money.” But the truth is, he wasn’t making money either—not in any meaningful, sustainable way.
This is the trap that today’s inverted yield curve has set. Short-term CDs are offering rates we haven’t seen in years, and many investors have flocked to them as a haven from market volatility. But high yields on 6- and 12-month CDs don’t represent a permanent opportunity. They’re a byproduct of policy-induced distortion, not a reflection of true long-term value. And when the curve shifts the reinvestment options may look very different.
At Members’ Wealth, we approach fixed income differently. We segment fixed income exposure by risk factor, not just by issuer or credit rating. This is central to how we construct income strategies so that they are designed to endure.
Inflation Risk:
To manage inflation sensitivity, we often include ultra-short-term bonds and even high-yield savings instruments when appropriate. These assets provide liquidity and purchasing power. They are stable, nimble, and ideal for near-term spending needs. But they’re not where growth or long-term income is found. They’re the defensive linemen of the portfolio—important, but not the whole team.
Interest Rate Risk:
This is the part of the bond market that responds to moves in the Fed Funds rate and the broader yield curve. We use intermediate-duration, high-quality bonds to position clients for capital preservation and modest growth. This sleeve offers ballast in market downturns and is especially useful when we want to capture duration risk strategically—when yields are attractive or when rate cuts are expected. It's where many investors under-allocate when they chase short-term CDs.
Credit Risk:
Here’s where things get more nuanced. When clients need their portfolio to produce more meaningful income—or simply want to diversify beyond Treasuries—we explore the credit risk sleeve. This can include high-yield bonds, structured notes, private credit, and other research-driven strategies. We don’t blindly chase yield; we underwrite every opportunity with care. This bucket can be volatile, yes—but it’s also where the best managers earn their stripes. For clients with longer time horizons or taxable accounts, this sleeve has potential to enhance risk-adjusted returns when constructed thoughtfully.
Peter’s CD portfolio was entirely focused on inflation risk—and only in the current environment. There was no plan for what to do when those CDs matured. No framework for how to replace the income, rebalance for tax efficiency, or offset equity risk elsewhere in his portfolio. In his mind, “not losing” was the plan. In reality, he was losing ground in a different way: missing out on opportunities that a more diversified fixed income approach could unlock.
For example, in Peter’s case, we modeled a bond ladder using U.S. Treasuries and municipals, structured across 1 to 7 years. Not only did it preserve liquidity, but it also created a predictable cash flow stream and opened the door for tax-advantaged income. We added a carefully screened multi-sector bond fund in his IRA to provide exposure to higher credit spreads. In his joint account, we introduced tax-loss harvesting tactics for his existing bond ETFs to improve after-tax performance without sacrificing asset class exposure.
We also looked at his Roth IRA, which had been sitting in cash for years. With no RMDs and a long investment horizon, that was a perfect place to own longer-dated municipals or even equity-like fixed income strategies—assets that could grow tax-free and eventually be passed on to heirs.
Peter’s situation, like many others we see, highlighted how a collection of yield-maximizing moves doesn’t equal a plan. Fixed income is not just a placeholder, it’s a tool that can be tailored to address volatility, taxes, cash flow, and estate goals if you know how to wield it.
That’s where Members’ Wealth aims to add value. We bring clarity by building income strategies that reflect each client’s bigger picture. We coordinate bond exposure across account types, align it with projected spending, and measure performance not just in yield—but in how it supports your overall plan.
So if your current fixed income strategy is a collection of CD renewals and bank statements, it may be time for something more. Rates will rise or fall, but your plan shouldn’t be held hostage by the short end of the curve.
Let’s talk about how we can align your fixed income exposure with your life—and use the RITE framework to build a portfolio that works harder, lasts longer, and evolves with you.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon.
These examples are for illustrative purposes only and do not represent actual client experiences. Individual results will vary based on personal financial circumstances and tax laws.
Stu Caplan is Senior Wealth Strategist at Members’ Wealth, a boutique wealth management firm that offers a comprehensive approach to serving individuals, families, business owners, and institutions.
The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of industry experience, Stu and the Members' Wealth team thrive on bringing clarity and confidence to clients' unique situations.
Stu received his MBA from The Robert H. Smith School of Business at the University of Maryland and his bachelor’s degree from the Eller College of Management at the University of Arizona. Stu resides in Bucks County, PA with his wife and two sons. He’s an avid golfer and is thrilled that his boys have embraced the game. He also volunteers his time as a board member of the PKD Foundation and Abrams Hebrew Academy.
To get in touch with the Members’ Wealth team today, I invite you to email info@memberswealthllc.com or call (267) 367-5453.
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Investment strategies, including rebalancing, do not guarantee improved performance and involve risk, including potential loss of principal. Past performance does not guarantee future results.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon.
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