To put it simply, I would worry about retirement with retirement funds, and other means with tuition. the 529 plans that Anthony brought up is a good alternative, and one you should consider because of its tax benefits. However, 529 plans are for tuition only, and as much as you believe you will go to graduate school, many people end up not going back, especially after they’ve gotten a taste of income from a job and the lifestyle that brings. (ie, some people find it hard to give up their income and eat ramens again after having the occasional Ruth Chris dinners), so 529 plans may or may not be worth it because the penalties of not going to graduate school would be big.

Speaking of bonds, due to the near certainly that rates are going to go up, I would buy bonds instead of bond funds. I know it requires much more research and maintenance, but bonds need to be held to maturity and therefore your principle are not susceptible to rate fluctuations. Bond funds on the other hand are destined to fall in prices in the coming years if rates rises. For the most part, the next 10 years for bond funds will most likely not be as good as the last 10 years, so tread lightly.

3.70% may not sound like a lot, but for the zero risk that you are assuming with this investment, the rate is actually awesome in my opinion.

Given that your goals are educational, perhaps you could look into a 529 plan? No tax-deductibility on the way in like an IRA, but the earnings coming out would be. Don’t know about any income requirements, but at least you wouldn’t have to worry about meeting the IRA withdrawal limitations and tracking the associated documentation carefully to avoid penalties.

Good luck!

And to top it off, I am paying out of my savings for my school tuition and related expenses. I was thinking of getting an IRA account and then depositing the interest income from the savings every year into the account and then later withdrawing it under the allowed condition that the funds are used for higher education expenses so that I get some added tax benefits.

I was hoping if that would work, that I can add the MLCDs under the IRA account with a years contribution at my tax bracket (near nothing due to this years really low interest levels on most savings accounts including CDs) which is $5,000 as the limit I believe for me tax/income status. And with the MLCDs under the IRA then maybe I can offset the taxes incurred there that would have been otherwise pretty high assuming the MLCDs perform well (which I think is what I think Mr. Jeff Shaffer was talking about earlier in this post)

Id love to hear your thoughts on this.

Note: I have not verified that an IRA will actually be within my reach right now as a full time unemployed student. I need to ask a tax expert about that.

Maybe what you can do is figure out how much money you’ll be getting with a 10 year CD and then factor that into your calculation. Also, you might want to figure out whether you can earn money in this 10 year time frame. The reason why this is important is that your income can supplement the money you’ve already saved up for graduate school, so if stocks/bonds take a dive (say, 9 and a half years from now), you don’t need to sell them at the worst moment.

I only need the money for graduate school which is about 10 yrs from now.

Any recommendations?

You cant get something for nothing, we all know this, so when you are investing in a product that guarantees your return of principal at maturity (NO downside risk), you may have to give up something comparable on the upside in return for that feature (risk/return tradeoff) –> this is where the barrier feature comes in. It is NOT because the bank doesnt “want to lose their shirts should the market rally” Anthony. The banks who sell these MLCDs are actually not on the other side of the trade (i.e. they do not make money when you lose money), they use the interest from the investment in the CD to buy options that in turn give you the payout of the underlying index, and therefore it is not a you win i lose type of situation.