On Suze Orman’s PBS special, she was telling her audience (the US middle and lower classes) that they should be buying 5 year municipal bonds with any money that they have available and want to safely park for the next five years.

While this advice is ordinarily very good counsel for those in the highest Federal and State tax brackets (not Suze Orman’s audience), it makes little sense at all in the current rate structure. And, it absolutely makes no sense for Suze’s target audience.

Here is why: A AAA-rated insured NY municipal bond which matures in 5 years is going to trade at 1.20% at the moment, if you have a broker who can find you one. The fully taxable equivalent for someone who lives in NY City and pays 39% tax (Federal, State and NY City) is about 1.96%. For someone who is in a lower tax bracket, the fully taxable equivalent will be lower. An AAA-rated municipal bond in other high state-tax States like Illinois, California, Massachusetts, Georgia or New Jersey is going to trade roughly at the same level. In States with low taxes, or no taxes, like Florida or Washington, you may be able to find a high quality 5 year municipal bond trading close to 1.50%, but in no case at the moment is a holder going to a fully taxable equivalent more than 2% on a safe municipal bond.

On the other hand, a fully FDIC-insured 5 year Jumbo CD issued by CIT bank currently pays 2.27% APY, and several online banks are offering 5 year CDs with rates as high as 2.25% APY. Those rates are available nationally, but depending on where you live, you may find higher rates on BestCashCow that are offered in a branch by a local banks and credit union near you.

Unlike a municipal bond, the purchase of a CD – online or otherwise – ordinarily involves absolutely nothing in the way of a transaction fee (hidden or otherwise). More importantly, while an investor may think that they do not need access to their money for five years, it is very possible that life circumstances can change and they could need to access it. In the current interest rate environment, an investor could lose significant principal on a new municipal bond purchased today if rates rise (which is something Suze Orman realizes and her reason for cautioning against bond funds at the moment). With a CD, that investor would only face an early withdrawal penalty, expressed in terms of interest although it may affect principal in the event of an extremely early withdrawal. The CIT Bank and Synchrony Bank penalties for earlier withdrawal on a 5 year CD, for example, are only 12 months and 6 months, respectively.

Suze Orman’s advice is generally very good. But, in recommending municipal bonds, she is wrong because she is not aware of the current bond and CD rates. You can always remain up on the rates by checking them here.

The JP Morgan Chase CD being syndicated by TD Ameritrade has a maximum maturity of 6 years, paying 1% for the first two years, 2% for the next year, 3% in years 4 and 5, and 5% in year 6. The note - however attractive it may appear at first glance - is callable anytime after 6 months and therefore should be absolutely avoided.

More likely than not, if interest rates remain low, JP Morgan Chase is going to call the note within the first two years. If interest rates, however, were to begin to revert to historically normal levels over the next two years, JP Morgan can continue to pay note holders rates which may very well be below market rates at that time into years 3 through 5, calling the CD at any point should it be offer a rate than begins to become close to a normal rate of return.

Since JP Morgan Chase has the call option, the entire proposition is in their favor, and while I have often advocated that investors look at structured notes that involve their effective sale of a call option, those notes always involve the receipt of higher interest rates in the near term in return for the sale of the call (often as high as 10 or 11%). In this case, JP Morgan is giving depositors a 1% interest rate for the first two years - a rate which is even worse than the best cash rates today! See and compare the best cash rates here.

To boot, these types of syndicated structured notes are not liquid, and cannot even be redeemed early by paying an interest penalty the way that ordinary CDs can. Rather, purchasers of these notes who want out early will essentially be relying on TD Ameritrade (or a subsequent broker) to go out and get the market price (i.e., take whatever anyone is willing to pay for the CD).

Even a depositor who wants to bet that rates are not going to rise over the next 5 years and is willing to lock into a rate for that time would be better off buying a 5 year CD. The current best rate on a 5 year CD is 2.32%. Exclusive of tax consequences, $100,000 invested in that CD will produce $12,150 over the next five years versus the JP Morgan Chase product which will produce $10,386 if not called earlier. The 5 year bank CD, unlike the JP Morgan product, can be redeemed early by payment of an interest penalty fee.

A still more logical choice in this current environment in light of the reality that rates are likely to go up at some point over the next two years is to either stay in cash, or to invest in a two year CD. One of the most interesting 2 year CDs available today is a RampUp Plus CD offered by CIT Bank, currently paying 1.35%. These CDs offer not only better fixed rates than the JP Morgan Chase callable CDs over the next two years, but enable depositors a one-time rate increase if rates should rise over that period. (The RampUp products were recently named a Best Bet for 2015 by BestCashCow.com.)

Under any circumstances, there are plenty of good CD options available, even in the current rate environment. The JP Morgan Chase product currently being syndicated by TD Ameritrade should be avoided.

Editor's Note: This article cites a 6-month early termination fee on Synchrony Bank's 5 year CD product. In 2016, Synchrony Bank's terms and conditions were changes so that the early termination fee is now 1-year of interest on the CD.

The last couple of weeks have seen virtually unprecedented volatility in the US bond markets. While some analysts (perhaps most notably Deutsche’s Joe LaVorgna) say that the Fed could surprise markets and raise rates as early as June 2015, we have also seen the 10 year Treasury fall below 2% as a result of Ebola and global market fears.

As a result, the most sensible strategy for money that you do not anticipate needing for a period of time is to buy bank issued CDs, specifically 5 year CDs. By so doing, you are coming to terms with the likelihood that low rates may be here to stay for a reasonably long period of time and, thus, finding a safe way of getting higher yields than savings or money market accounts now offer and at the same time protecting yourself from the possibility of seeing the 10 year Treasury rise above 4% before October 2015. Bank issued CDs, especially 5 year CDs, offer higher yields than savings. Some banks also provide an option against a sharp move in Treasuries in the form of attractive early withdrawal penalties.

Should interest rates move dramatically higher, bonds – even short duration bond funds – will move dramatically lower. We saw fixed income values fall in mid-2013 as the 10 year Treasury moved from 1.50% to 3.00%. The more relevant historical precedent remains the late 1970s when oil and food shocks boosted inflation and yields increased to double digit levels, leaving bond and bond fund holders with negative real income returns and punishing capital losses.

Certificates of deposit do not bear the same risk. Should interest rates rise from their current levels and a long-term CD cease to produce competitive yields, investors usually have the option to withdraw the balance in part or in its entirely, forfeiting only an early withdrawal penalty calculated as a percentage of interest earned. The early withdrawal penalty will cut into some interest earned, but it can only reduce principle if one withdraws very early in the term.

Early withdrawal penalties among the most highest rate online issuers of 5 year CDs are as follows:

Synchrony Bank – 6 months

Barclays Bank – 6 months

GE Capital Bank – 9 months

CIT Bank – 1 year

Nationwide Bank – 1 year

EverBank – 15 months

A six month penalty only is particularly attractive. Synchrony Bank is currently offering 5 year CDs at 2.30%. An investor placing, say, $200,000 in such a CD with one of these banks would receive more than $24,000 gross over the next 5 years, compared to about $10,202 were the same monies invested in a 1% savings account.

See BestCashCow.com’s compound interest calculator

In 5 years, a 5 year CD will outperform a savings account and will have generated a decent premium over the savings account, should savings rates stay where they are. However, if interest rates were to significantly rise in one year, the investor could exit the CD, paying only a $2,300 early withdrawal penalty (six months interest), and still have their entire principle plus $2,300 in interest. Under such a circumstance, the effective return of the 5 year CD in the first year would be 1.15% - still better than any currently offered savings or one year CD rate.

Similar calculations show that yields on a five year CD can be still better than shorter term CDs in years two three and four, even when investors pay an early forfeiture penalty. In fact, the further away an increase occurs in interest rates in the United States, the better will be the positive impact on earnings from a 5 year CD with a six month withdrawal penalty. For example, the effective return of a 5 year CD held for 4 years may outperform that of a 4 year CD, even if the investor pays a six month early withdrawal penalty at the beginning of year 4.

The option that you are getting inherent in a CDs early withdrawal penalty is valuable. While rates may rise quickly over the next year, these options offer depositors significant safety and security that bonds and bond funds do not.

For these reasons, 5 year CDs are particularly compelling at this point. However, before making any purchases, you should always check to be entirely sure that you understand the early withdrawal penalty.

See the best 5 year CD rates here.