The common wisdom is to go long at the top of a rate cycle and short at the bottom.

Some of our readers disagreed with that strategy.

“You can usually go for the longest term to lock in the highest rate, then break the CD if rates go up substantially,” Mark C. told us.

Even after paying the early withdrawal penalty “you will usually come out equal or better to the shorter-term CD’s yield…”.

So we decided to test that theory with the best-paying nationally available 5-year CDs. They are:

3.50 APY from Bank United, with a $5,000 minimum deposit.

3.30% APY from EverBank, with a $1,500 minimum deposit.

3.25% APY from DimeDirect.com, with a minimum of $500.

Bank United, which has 75 branches in Florida, has the most reasonable early-withdrawal penalty: After the first year, you forfeit six months worth of interest.

If you take your money out after a year, and only get paid for six months worth of interest, then you’d still have earned 1.75% — almost as much as the 1.90% APY the top-paying 12-month CD is paying.

Hold on to your 5-year CD for 24 months and that return grows to something like 2.6% — which is more than the 2.30% APY you can earn with the best 24-month CD.

So in this instance, Mark is right. You can game Bank United’s 5-year CD to make bigger short-term profits.

(Dear Bank United executives: While I’m saying that it’s possible to take advantage of your long-term CD rates in this way, I’d never encourage our readers to do such an irresponsible thing. Please put down the phone. DealMaven)

But as another reader, KenBDG, said during this discussion: “One important note is that early withdrawal penalties can vary considerably. Some 5-year CDs have only a 6-month penalty, but some have much higher penalties.”

EverBank, based in Jacksonville, Fla., is one of those banks.

It charges one-quarter of the interest you would earn over the entire 5-year term, no matter how long your keep it.

Take your money out after one year, you’ll actually lose money. They’ll reclaim all of the interest you earned and ding your principal for the rest.

(That’s harsh. Do you know of any other bank that won’t return your full, initial deposit, on demand?)

Keep it for two years and your return will be a paltry 0.5%.

DimeDirect.com, the online operation of Dime Savings Bank of Williamsburgh, which has almost two dozen branches in the New York area, charges 24-months worth of interest.

Take your money out before two years are you’ll earn nothing, although Dime will return the full amount of your principal.

Neither of those are good deals for savers plotting to hop out early.

It’s a good move for younger savers who are a long way from retirement and can expect to be making more in retirement than they are in their late ’20s or early 30s.

It’s not a good move for savers in their 40s and 50s who are closer to retirement, have reached their peak earning years, and will almost certainly see their income drop after they retire.

There. Problem solved.

Follow those simple guidelines and you’ll stand a good chance of minimizing your tax bill and maximizing your balance for these retirement accounts.

The decision seems like a tough one because it requires you to make many assumptions about how much you’ll be making 20 or 30 years from now and what tax bracket you’ll be in.

Who can predict tax rates a few years from now, much less a few decades from now.

It is enough to drive you a little crazy and everyone’s fretting over this because the government has removed all income restrictions on these conversions this year, making them open to more prosperous taxpayers.

(Prior to 2010 you had to have a modified adjusted gross income of $100,000 or less.)

Washington is also offering taxpayers a one-time deal: You can pay all of the tax on your conversion in 2010 or in equal installments on your 2011 and 2012 tax returns.

All deductible contributions made to traditional IRAs, and all of the earnings from the investments in those accounts, will be considered taxable income if you convert to a Roth IRA.

Voluntarily paying the tax on that money now doesn’t make sense unless you think you’ll be earning more, and in a higher tax bracket, after you retire.

That certainly doesn’t describe many 40- or 50-year-olds I know. They’ve got to save like crazy to insure that their income doesn’t fall 20%, 30% or more after they stop working.

But if you’re young, with 30 or 40 years of better jobs and higher salaries ahead of you, then there’s a good chance your retirement income (and tax bracket) will be higher than your current income (and tax bracket).

Think about it.

How many people retiring today stand to earn more from pensions, Social Security and their savings than they did from their first or second jobs, 40 years ago?

A lot, right?

This Roth IRA conversion calculator reflects this reality, and can help you make a decision based on your specific age and tax bracket.

But three of the five rates have already been cut, including the top two.

That sent us back to work and we’re pleased to report that we’ve found four new deals that are actually better than the ones they replace.

These offers clearly come with no guarantees. Savings account rates are variable and can change tomorrow — or not until next year.

Yet they offer a better return than the top-paying 3-month CDs, and all but the very best 6-month CDs.

The top rates on nationally available savings accounts now are:

1.75% APY with a $25,000 minimum deposit from Franklin Synergy Bank, which has two branches in Franklin, Tenn.

1.70% APY with a $10,000 minimum deposit from The Palladian Private Bank, which is based in Chicago and has 34 locations in 10 states.

1.55% APY with a $1 minimum deposit from UFB Direct, an online affiliate of Waterfield Bank, which has a couple of full-service offices in Carmel, Ind., and Germantown, Md.

1.55% APY with a $1 minimum deposit from Chesapeake Bank, with a single branch in Williamsburg, Va.

Most money markets currently pay less than savings accounts, with one notable exception: the Mega Money Market Account pays 2.00% APY and is available from three jointly owned banks in Oklahoma.

Compare these rates with the best savings rates from scores of other banks in our extensive database.

U.S. savings bonds — yeah, savings bonds — have become a better investment than most CDs.

Series I Bonds are paying 3.36%, which is more than the best, nationally available 6-month, 12-month, 24-month and even 36-month certificates of deposit.

Indeed, only a few top-paying 5-year CDs can beat that return.

Although the interest rate on Series I Bonds resets every six months to reflect the current rate of inflation, it’s hard to imagine the Consumer Price Index will decline anytime soon.

Although you can keep savings bonds for a long time, you don’t have to.

They can be cashed out after 12 months by paying a modest penalty of 3-months interest. After five years, there’s no redemption penalty.

Let’s say you only kept the bonds for 15 months. Your annualized return would still be 2.68%. You can’t earn anywhere close to that with the best 12- or 24-month CDs.

Savings bonds have several tax advantages over CDs, too:

• You don’t have to pay tax on the interest you earn until the bonds are redeemed. With CDs, you’re taxed on the interest in the year it’s earned.
• The interest earned on savings bonds is exempt from state and local income taxes. That’s a big plus for residents of states that levy a hefty tax on investment income, such as California and New York.
• The interest can even be exempt from federal income taxes if the bonds are used to pay for eligible college expenses. (See IRS Publication 970, Tax Benefits For Education.)

Unfortunately, the government will only allow you to invest $5,000 a year in a single type of bond, under a single Social Security number.

But it’s possible to buy $5,000 worth of I Bonds online, and another $5,000 worth of paper I Bonds, with a single Social Security number.

The easiest way to buy savings bonds is at TreasuryDirect and have them issued electronically to your account.

Paper bonds are still available at most banks.

The new Electric Orange checking account from ING Direct doesn’t come with checks.

It’s the closest thing to a truly paperless checking account we’ve ever seen.

The online bank owned by the Dutch financial giant ING allows customers to access their money through:

• A debit card.
• An online bill payment system.
• Person2Person electronic transfers, which allow you to send a friend or relative money without knowing their account number.
• Electronic checks. If you simply must give someone a paper check, ING will print and mail it for you.

All of that is free (even the postage for electronic checks is covered), and there’s no minimum balance or monthly service charge.

You can use the debit card at 35,000 Allpoint ATMs without charge.

What you never, ever get is a book of checks.

A short Electric Orange video explains how this electronic checking account works.

ING emphasizes the fact that this is an interest-paying checking account that acts “like a savings account” — which isn’t saying much these days.

Electric Orange pays a modest 0.25% APY on balances of under $50,000, 1.35% APY on balances between $50,000 and $100,000, and 1.40% APY on balances over $100,000.

But it’s the paperless operation that sets this account apart.

“Writing checks is a thing of the past,” the video claims.

We think ING may be right.

That means taking advantage of your bank’s “relationship” rates.

In most instances, that’s where checking account customers are offered higher interest rates on savings accounts or certificates of deposits.

Some relationship deals don’t make you feel all that special.

Chase Bank, for example, is paying 0.05% APY on savings accounts with balances under $10,000, and 0.10% APY to customers who qualify for “relationship rates.”

But Fifth Third Bank, with almost 1,300 branches in 13 Midwest and southeastern states, has a little better offer.

It will double the interest on savings accounts, which means you can earn 0.50% APY on balances between $2,500 and $10,000, and 1.00% APY on balances over that.

When you consider that the best 3-month CDs are only paying 1.25%, that makes a Fifth Third savings account a pretty good place to park short-term cash.

Country Bank leads our rankings of the best, nationally available 6-month CDs.

The bank, which has 14 branches in central Massachusetts, is paying 1.60% APY with a $500 minimum deposit.

But if you have a checking account (with a regular direct deposit and minimum balance of $1,000) you can earn 1.85% APY on 6-month CDs.

Salem Five , another bank with more than a dozen Massachusetts’ branches, has a similar deal.

Its Gold Star checking account customers qualify for higher-paying Relationship CDs.

A regular 9-month CD currently pays 0.75% APY. A Relationship CD earns 1.25% APY. A regular 24-month CD pays 0.90%. A Relationship CD pays 1.75%.

(The only drawback is Salem Five’s Relationship CDs require a hefty $10,000 minimum deposit.)

We’re not suggesting that relationship deals like these are worth the cost, or the hassle, of opening a new checking account.

We just want you to benefit from the relationship rates at your current bank — and put a few extra dollars in your pocket.

The average return on 12-month certificates of deposit has fallen to a measly 0.77% APY, and the average return on 24-month CDs has plunged to 1.19% APY.

But Colorado Federal Savings Bank is paying 1.70% APY on its savings account.

A minimum deposit of $2,500 must be maintained to qualify for that rate, but the account can be opened online and is available to savers nationwide.

(Fine print: Although accounts can be jointly held, you aren’t allowed to name beneficiaries in the case of death, which is a deal-breaker for some.)

Although the Web site for this online bank based in Greenwood Village, Colo., says this is a fixed-rate account, we checked and that’s wrong.

Like all savings accounts, the rate at Colorado Federal is variable and could be reduced at any time.

But there’s no long-term commitment with a savings account, so if you become disenchanted with your rate, you can always withdraw your money and move on.

The next-best rates on nationally available savings accounts are:

1.60% APY from Bank of Internet, an online bank based in San Diego. You need only $100 to open an account and there are no minimum balance requirements.

1.50% APY from American Express Bank, the online bank owned by the credit card company. No minimum deposit is required.

1.50% APY from Ultima Bank Minnesota, with locations in Fosston and Winger, Minn. A minimum deposit of $1,000 is required and must be maintained to earn interest.

1.50% APY from Dollar Savings Direct, the online division of Emigrant Bank, which has dozens of locations in the New York City area. A $1,000 account balance minimum is required.

Most money markets currently pay less than savings accounts, with one notable exception: the Mega Money Market Account pays 2.00% APY and is available from three jointly owned banks in Oklahoma.

Compare these rates with the best savings rates from scores of other banks in our extensive database.

Or at least nothing for the money we put in our savings accounts.

Here’s the return the four largest banks are now offering on their regular savings accounts:

Bank of America: 0.10% on all balances

Wells Fargo: 0.05% on balances up to $25,000

Citi: 0.25% with a $500 minimum balance

JPMorgan Chase: 0.01% all balances

For all practical purposes, that’s zero. Nada. Nothing more than pennies for your hard-earned savings.

Unfortunately, this is the entirely predictable result of the Federal Reserve’s campaign to shower commercial banks with all the free money they could possibly want. (It does that by charging them 0.0% to 0.25% for short term loans.)

The policy made sense when the banking industry on the verge of a calamitous collapse that would have plunged the world into another Great Depression.

It guaranteed a great yield spread between what banks paid for money (including deposits) and what they charged for loans.

And let’s be clear. The Obama administration and Federal Reserve have been willing to do almost anything over the past year to help the banking industry.

They’ve certainly done far more for the banks than they’ve done for the typical family coping with the economic fallout from the financial crisis caused by all of the banks’ irresponsible lending.

What Obama and Federal Reserve Chairman Ben Bernanke clearly didn’t anticipate was the industry’s ungrateful response and the public backlash those arrogant bankers have unleashed.

This policy requires millions of us to sacrifice even a modest return for our hard-earned savings to help a banking industry that slaps us in the face at every opportunity.

The banks won’t help us save our homes from foreclosure by modifying our mortgages. They relentlessly raise the rates on our credit cards to unconscionable heights, cut our credit limits and impose all sorts of fees and penalties if we’re a second late with a payment.

Whatever public support existed for bailing out the banks has been squandered and Obama is going to pay a fearful political price if he and Bernanke continue on the current course.

For much of the fall it was promoting quite a good rate on its Web site: 3.00% APY, with a minimum deposit of only $500.

At one point that would have been good enough to top our rankings of the best 36-month certificates of deposit — if the deal had been available nationwide.

But it wasn’t because Flagstar had the odd policy of paying savers who lived near one of its branches in Michigan, Indiana or Georgia less than other customers — 2.75% APY.

Around Thanksgiving, the bank dropped its rate to 2.85% APY. On Dec. 4, the return fell to 2.60% APY, four days later it hit 1.75% APY and on Dec. 16 it reached 1.50% APY — half of what it had been just three weeks before.

That was a pretty stunning drop even by last year’s dreadful standard for rampant rate-cutting.

Then, on Monday, Flagstar reversed course and increased the yield on its 36-month CDs back to a respectable 2.35% APY.

What other bank in the country is boosting the return on its CDs by almost a point in this market?

Oh, and it’s still screwing the locals. Live near a Flagstar bank and you’ll only earn 2.09% APY.

We’ve asked Flagstar about all of this and were passed around to a couple of spokespeople, the last of whom promised to get back to us.

We’re still waiting for the phone to ring with an explanation for this strange and volatile pricing.

But today we’re going to focus on where to find the worst deals.

We’re talking truly wretched rates such as 0.15% APY on a 6-month CD, or 0.25% APY for a 12-month CD.

Those are the kinds of deals you’ll find these days at the nation’s biggest banks.

JP Morgan Chase is the worst, but Citibank, Wells Fargo, PNC and all the others are nearly as bad.

These banks don’t have to compete for our savings because:

• They can borrow as much money as they need from the Federal Reserve for practically nothing. No, really, the rate for overnight loans is 0% to 0.25%.
• They don’t really need much money because they’re whacking billions from their loan portfolios every month.

That’s why you see one small bank after another take a turn at the top of our CD rankings.

These are banks that are still trying to grow by taking in new deposits and funneling that money to new loans and investments.

But so many savers rush to those small banks that more money than they can wisely use floods into new accounts.

Within weeks, sometimes days, they cut their rates to slow the flow of money into the bank and fall out of the rankings.

The bottom line for savers: We won’t see decent certificate of deposit rates again until the big banks, with their ability to put large sums of money to work, get back in the game.

Yet look at the shameful difference between what the big banks are paying and the best, nationally available deals from the smaller banks that lead our rankings:

Harris Bank is paying 0.15% APY on a 6-month CD. TotalBank is paying 1.65% APY.

JP Morgan Chase is paying 0.25% APY on 12-month CDs. Five small banks, including H&R Block Bank are paying 2.00% APY.

PNC Bank is paying 1.05% APY on a 24-month CD. Frontier Bank is paying 2.40% APY, 2.45% APY or 2.50% APY, depending on the minimum deposit.

Bank of America is paying 1.86% on 36-month CDs. Goldwater Bank is paying 3.03%.