Collecting Meaningful Interest Again
It seems like earning any interest on bank accounts was laughable not that long ago. How many times did you get a bank statement showing pennies of interest on your balances? Well, 2022 changed that! While inflation soared, so did interest rates, meaning there is opportunity to increase risk-free returns on cash savings.
While our advice is specific to each one of our clients, there are certain fundamental rules that we follow. Like “have a cash reserve of 3-6 months of your expenses” while working, to be able to navigate any emergencies or opportunities that arise. And “have a cash reserve of 1-2 years’ worth of the withdrawals you plan to take from investments” while retired, so as to not have to liquidate any investments at the wrong time when markets are volatile. Hence, if you have cash above and beyond your typical reserve, we’d suggest you talk to the bank about what instruments might be best for you and collect more interest.
In many cases, a simple certificate of deposit (CD) will do. Many local banks and credit unions can offer 4% on a 12-month CD. If there is cash you are fairly certain you won’t need access to for that period of time, 4% is a very attractive return! You could also ask about high-yield savings or money market accounts as well. While the rates may be lower, access to those funds may be a preferred trade-off. Buyer beware though on anything that would require a contract or tie your money up in a different way, such as a fixed annuity. Yes, higher rates may be available, but annuities “qualify the money” and would change taxability and accessibility, especially for those under the age of 59.5.
If you have questions or want to go through the specifics of your situation, don’t hesitate to reach out to us. We’re happy to help!
Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.
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