The Federal Reserve hasn't cut interest rates this year, giving savers ample time to capitalize on higher rates of return. However, this will soon change.
The Fed meets next week, with CME FedWatch projecting a 95% probability the Fed will cut rates by 25 basis points. Why? They're concerned that the lack of job growth outweighs the rising costs from inflation.
With this in mind, you'll want to devise a plan now, with the expectation that there will be at least one, potentially two cuts happening this year. Thankfully, high-yield options still hold the promise of higher returns, even with a slight dip from rate cuts. Here are your best options to consider.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
CDs: A Fed-resistant way to save
CDs won't earn you the highest rates of return, but they come with a protection other savings options don't have: A fixed APY. That means if you lock in a longer-term CD now, the rate you lock in will be the same rate you carry throughout the term.
So, even when the Fed cuts rates, as our team projects, you'll stay ahead of the curve, with many CDs earning over 4%. Short-term CDs, such as a six-month option from ableBank, earn you a 4.50% return on your deposit.
Using this Bankrate tool can help you compare and find the best CD rates for you:
A few things to consider with a CD:
- You can't add to your initial deposit
- Early termination penalties are steep if you need access to your cash
- Some banks renew your CD automatically, so set a reminder before it matures
Who they work best for: Risk-averse savers or those nearing retirement who want a guaranteed rate of return that won't change with Fed policy.
Keep things fluid with a high-yield savings account
High-yield savings accounts (HYSA) offer more fluidity. You can access your money whenever you need to, unlike CDs, which keep your money tied up until maturity.
Right now, you can earn well above 4% for most accounts. Our top pick, Newtek Bank, offers you returns of 4.35%
A few things to remember about HYSAs:
- They feature variable interest rates, so if the Fed cuts rates, your returns will be lower
- Some banks have minimum balance requirements or you'll have a monthly fee
- Most of the best rates come from internet banks, so it's wise to switch all your accounts to them for easier cash access
Who they worked best for: Savers wanting quick access to their cash for unexpected expenses or to quickly pivot to other strategies.
Reach retirement benchmarks with investments
Historically, a diversified portfolio of stocks, mutual funds and bonds earns you a higher return than CDs or HYSAs.
You can also tailor your investment strategy based on your risk tolerance and retirement goals. Many brokerages have advisory services that can help you reach your goals and suggest options if performance isn't optimal.
Shop for adviser options with this Bankrate tool:
Things to keep in mind with investments:
- Returns are not guaranteed
- Harder to access your cash if you need it, with substantial tax consequences
- Fee-based advisers can eat into returns
Who they work best for: Savers who already have an emergency fund of six months of expenses, who are also looking to reach retirement goals and keep their money ahead of inflation.
Ultimately, now is a great time to review your savings and retirement goals. Rates remain high, at least until the Fed starts cutting rates next week. Being proactive will help you maximize savings opportunities while keeping ahead of rising costs.
Related content
-
The Rubber Duck Rule of Retirement Tax PlanningRetirement Taxes How can you identify gaps and hidden assumptions in your tax plan for retirement? The solution may be stranger than you think.
-
No Passport? No Problem. Seven US Getaways That Feel Like an International VacationFrom Puerto Rico’s Caribbean flair to Santa Fe’s old world charm, these American destinations deliver a global travel experience — without the hassle of customs or currency exchange.
-
No Passport? No Problem. Seven US Getaways That Feel Like an International Vacation
From Puerto Rico’s Caribbean flair to Santa Fe’s old world charm, these American destinations deliver a global travel experience — without the hassle of customs or currency exchange.
-
Planning a Major Home Renovation? 3 Smart Ways to Finance ItFrom HELOCs to personal loans, here’s how to pay for a major home renovation without draining your savings.
-
Six Warren Buffett Quotes Every Retiree Should Live ByThe 'Oracle of Omaha' knows a thing or two about life, investing and retirement.
-
The Surprising Trick to Stop Money Stress Before It StartsA dedicated 15-minute weekly slot to confront financialstress could help you make smarter money moves.
-
You Retired and Stopped Commuting. How Do You Lower Car Insurance Costs?Retiring usually means cutting out that daily commute which could make you less risky to insure. Does that mean your car insurance costs will drop? Here's what you need to know.
-
My First $1 Million: Real Estate Investor, 54, Rural MidwestEver wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
Budget Hacks Won't Cut It: These Five Strategies From a Financial Planner Can Help Build Significant WealthCutting out your daily latte might make you feel virtuous, but tracking pennies won't pay off. Here are some strategies that can actually build wealth.
-
To Unwrap a Budget-Friendly Holiday, Consider These Smart Moves From a Financial ProfessionalYou can avoid a 'holiday hangover' of debt by setting a realistic budget, making a detailed list, considering alternative gifts, starting to save now and more.
