What $100,000 in Savings Earns You Right Now

When it comes to saving money, traditional savings accounts often offer minimal returns with annual percentage yields (APY) as low as 0.01%. For individuals with significant savings, such as $100,000, keeping funds in a traditional savings account can mean missing out on potential earnings.

While investing in stocks may offer higher growth potential, individuals over 50 or nearing retirement may prefer to have a portion of their savings easily accessible. However, leaving money in a traditional savings account may not be the most lucrative option. Fortunately, there are alternative accounts that offer much higher yields.

Maximizing Your Earnings

By earning a 4% APY on a $100,000 balance over five years, you could potentially earn an additional $20,000 compared to a traditional account with a 0.01% APY. Making the switch to higher-yield accounts can be a simple yet significant step towards saving more.

Top Choices for Storing Your Cash

While a traditional savings account with a 0.01% APY may only yield $10 per year on a $100,000 balance, there are better alternatives available:

• High-Yield Savings Account (HYSA): Offering APYs of around 4%, some of the best high-yield savings accounts can generate approximately $4,000 in interest per year while providing FDIC insurance and immediate access to funds.
• Certificate of Deposit (CD): CDs offer competitive APYs, with some reaching around 4%. Although CDs require locking funds for a specified term, you can secure a fixed rate, protecting your initial APY even if rates decrease.
• Treasury Bills (T-Bills): With APRs close to 4%, T-bills provide tax-exempt interest at the state and local levels. Terms range from four weeks to 52 weeks, offering flexibility in investment duration.
• Money Market Account (MMA): Similar to HYSAs, top money market accounts can exceed 4% APY, providing a blend of high returns and checkwriting capabilities.

Choosing the Right Account

While all these accounts offer superior yields compared to traditional savings accounts, selecting the best option depends on your financial goals and needs:

If you anticipate needing funds within six months, a high-yield savings account may be more suitable. For longer-term savings, consider a CD or T-bill to lock in rates or explore an MMA for checkwriting privileges.