If you’re retired or a few years away from it, you’re likely considering reallocating some of your assets to less volatile options to reduce risk. Fortunately, savings accounts still offer strong returns that surpass inflation and help achieve your goals during retirement.
If you decide to transfer some money, your next step is to choose the right savings account. Various options suit different needs, from having immediate access to cash to a hands-off account that earns a fixed rate of return, regardless of the Federal Reserve policies and interest rates.
To help you find the best fit, I’ve included several scenarios and the top options for each. Using this guide can help you find a savings account that supports your goals.
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1. I want access to my cash all the time
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If this is the case, then you have two options: A high-yield savings account or a money market account. Which one is better for you? Let’s break it down:
A high-yield savings account will be a smarter fit if you don’t need access to your cash immediately. It works best for savers who have a dedicated emergency fund for unplanned withdrawals with another account.
The reason? Online banks offer the best rates on high-yield savings accounts, yet some of them don’t offer ATM cards. That means that unless you open a checking account with the same bank, it might take a few business days to receive your money via an ACH transfer.
If you don’t mind the waiting, use this Bankrate tool to find the best account for you:
Meanwhile, a money market account is best if you need occasional immediate liquidity. Money market accounts come with debit cards and check-writing privileges, making it more of a hybrid savings/checking account.
Two things to consider with money market accounts are that you won’t earn as high a return as you would with HYSAs, and some banks limit the debit card transactions you can make on money market accounts monthly, so pay close attention to the terms if you go this route.
2. I am saving my money for a specific goal
In this scenario, a certificate of deposit (CD) is a smart option. The key with CDs is finding a term that matches your savings goals. To demonstrate, if you want to start a business next year after you retire, earmarking funds in a one-year CD is a smart way to ensure you’re ready to hit the ground running.
The nice thing about CDs is that they encourage you to keep your money in for the full term. If you need to break it open, you can do so, but the early termination fee will eat away at your earnings.
You can shop and find the best CD rates for your needs using this Bankrate tool:
The one thing I caution about long-term CDs is that if inflation continues to rise, it will limit your earnings. Case in point, the Iran war spiked fuel prices, which means the cost of everyday goods will also increase. A prolonged war could result in even higher fuel costs, driving up other prices and inflation further.
3. I have a large deposit and want to split it among savings accounts
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For savers with deposits of $100,000 or higher, I’ll always recommend exploring jumbo CDs first. They provide the highest returns among all savings options, with APYs reaching up to 4.35%. They also don’t have long-term maturity dates; usually, you’re looking at a commitment of six months to a year.
This makes them a flexible savings choice if you want to maximize your returns with some of your funds. However, if you need to split your deposit across multiple savings accounts for cash accessibility, there are several strategies you can use.
For example, with a $100,000 deposit, you could find a jumbo CD that only requires $50,000, placing half into that and the other half into a high-yield savings account. This method allows you to take advantage of two of the highest APYs available while maintaining liquidity and protecting some of your money from potential rate cuts.
Another option is a CD ladder. How this works is you open multiple CDs with different maturity dates, so you have cash flow while protecting your money from future rate cuts.
Ideally, you’ll want a mix of short-term and long-term CDs. That way, you have cash access if you want to pivot to other investments in the future, while some of your money continues to earn higher rates.
4. I don’t want to use online banks
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Your comfort should matter most when choosing a savings account. After all, you want peace of mind knowing you have access to your money when you need it. Or, if you’re caring for an aging parent, having access to a personal banker can make all the difference with financial planning.
Going with this approach means you won’t likely earn rates as high as you would with online banks. However, many regular banks, like Bank of America, U.S. Bank and Chase, offer relationship banking, where if you have enough money deposited with them (think $10,000 to $100,000), you’ll access higher returns on savings accounts.
And if you don’t have that much to deposit, it doesn’t mean you won’t have options either. Instead, look for promotional rates on CDs and savings accounts, as banks offer higher rates on them, so you can still earn a healthy return.
As you can see, there are many avenues when choosing the right savings account for your needs. Start by prioritizing what you’re looking for out of a savings account, then find a solution that fits best within that framework. Doing so puts you on the road to maximizing cash without the risk.