I'm a Financial Adviser: Here's How to Earn a Fistful of Interest on Your Cash in 2026 (Just Watch Out for the Taxes)

Is your cash earning very little interest? With rates dropping below 4%, now is the time to lock in your cash strategy — before rates drop even further. Just watch out for the tax implications.

By Jeremy Keil, CFP®, CFA®, CKA®

published 12 January 2026

in Features

A man's fist holds several dollar bills.

Most Americans are keeping their cash in the wrong place — and they are paying for it in lost interest.

With more than $18 trillion in bank deposits right now and an average savings account rate of 0.4%, Americans are missing out on billions of dollars of interest they deserve.

With the latest Federal Reserve rate cut, and the expectation of further cuts in 2026, now is the time to make sure you are getting the best rates on your bank money — and perhaps even locking in some of those rates if the timing is right for you.

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If you're not getting close to 4% on your cash, read on to learn how you can get hundreds, if not thousands more in interest each year by finding the right account, with the best rate, for you.

You're going to see two accounts you're quite familiar with, but probably not making the best use of. You're going to learn about a type of account you probably haven't used before. And I'm going to show you the number one problem I see when you start earning extra interest.

Before that, you need to remember the most important rule of investing.

The most important investing rule

The most important factor in your investment decisions is to determine when you need the money. I highlight the importance of splitting your money between short-term and long-term buckets in my book, Retire Today.

About Adviser Intel

The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Let's break that short-term bucket into three different time frames: Right now, sooner or later.

High-yield savings accounts — for your 'right now' money

If you need money available at the drop of a hat, that's money you need right now. Perhaps you keep money in a savings account, and that's what you use to pay your mortgage or car loan. Perhaps you want your emergency fund available whenever you might need it. The best solution here is often a high-yield savings account.

What's great about high-yield savings accounts is that they are just as safe and available as the savings account at your regular bank, but often pay eight to 10 times as much interest.

In December 2024, I helped a new client move $100,000 from their bank, where it was earning 0.4% interest, to a high yield savings account that averaged 3.8% throughout 2025. They earned $3,400 in extra interest in 2025 just by clicking a few buttons.

Kiplinger keeps track of the best h igh-y ield s avings accounts each month and the top rates are still above 4%.

You deserve to get more interest on your bank money, and linking your checking account to a high-yield savings account is a great way to keep the money available yet earn much higher interest than average.

Once you have one to three months' worth of expenses set aside in a high-yield savings account, you may want to start looking for higher interest or perhaps lock in interest rates so that you're not worried about your savings accounts rates going down when the Fed cuts interest rates.

That's where your sooner money comes in with certificates of deposit (CDs).

CDs — for your 'need it soon' money

When you have more than you need in savings, it's time to start looking at CDs.

The key here is to make sure you're buying a CD based on when you need the money. Often, you'll set up CDs for money that you expect to use in perhaps six months to three to five years from now.

Kiplinger tracks CD rates each month, and you can still get roughly 4% on CDs right now. The positive with CDs is that you know what interest rate you'll be getting for a specific length of time, compared to savings account rates that could change at any moment.

The downside is that you are locked in and will likely pay a penalty for cashing in your CD early. That's why you usually don't buy CDs until you have enough in your high-yield savings account, or set up what's known as a CD ladder.

The CD ladder helps you keep higher rates in the event of Fed cuts, as well as making sure you can access money soon, without a penalty, if you need it.

After you have enough cash in your high-yield savings and CD ladder for the next few years, you may have money left over. If you don't want to invest into the stock market, you'll still want to get a high guaranteed interest rate.

That's where the next level, "need it later" money, comes in.

Multi-year guaranteed annuities — for your 'need it later' money

Chances are you have a strong opinion about the word annuity — and chances are that opinion is not based on multi-year guaranteed annuities (MYGAs).

MYGAs are quite similar to CDs in that they offer a guaranteed interest rate over a set period, but there are a few key distinctions:

CDs are issued by banks and backed by the Federal Deposit Insurance Corporation (FDIC) at the federal level. MYGAs are issued by insurance companies and are backed by insurance guaranty associations at the state level. The coverage amounts vary per state. Make sure you research your state's guaranty coverage before buying a MYGA.
Both CDs and MYGAs have early-withdrawal penalties, although CDs are much less severe — often only three to six months of interest as a penalty. MYGA early withdrawal penalties are often 7% to 9% of the value that you take out early. MYGAs often allow you to withdraw 5% to 10% of the value each year, if you need it, while CDs might not allow you to access any of your money early without a penalty — or perhaps just the interest you've earned that year.
Where MYGAs shine is the interest rate, which is quite often 1 percentage point higher than you could get in a similar-length CD.

There's another caveat, and benefit, when it comes to MYGAs: They are tax-deferred, which means you delay paying taxes on the interest you earn. However, if you cash them in before you turn 59½, you pay a 10% penalty on the interest earned.

MYGAs are generally best for people who are past 59½, have plenty of readily available money in high-yield savings accounts and are willing to accept potentially higher early withdrawal penalties in exchange for the tax deferral and the higher interest rates.

Now that you're earning all this extra interest, you'll likely face a new problem – extra taxes.

More interest = more taxes

The number one problem with getting more interest is that interest-rate-type accounts often report interest, but almost never withhold interest.

One advantage of the MYGAs listed above is that they are tax-deferred, so you won't have to pay taxes on the interest until you take the money out.

However, withdrawals from annuities, including MYGAs, come with a 10% early-withdrawal penalty if you take the money out before age 59½.

The extra interest you earn from high-yield savings accounts and CDs doesn't have a 10% pre-59½ early withdrawal penalty, but you will have to report and pay taxes on the interest you earned during the year, even if you didn't use the money.

Make sure your tax preparer or financial advis e r knows that you're earning extra interest from your smart money decisions this year.

They are likely to suggest that you either do quarterly estimated tax payments or withhold extra from your paycheck so that you don't end up with an underpayment tax penalty. They might even suggest you use your IRA, especially your RMD payments, to do extra tax withholding.

Three basic steps to follow

You deserve to get as much interest as you can on your bank money. Follow these three steps to get more interest and avoid a tax surprise down the line:

Decide whether you need your money available right now, sooner or later
Find the best interest account for when you need your money
Plan for the extra taxes so they don't surprise you at tax time

Don't spend another year earning less than you deserve on your bank money. Who knows, maybe this year's extra interest will pay for next winter's tropical vacation.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Jeremy Keil, CFP®, CFA®, CKA®, is the retirement planner you turn to when you're ready to retire but don't know how to do it. He's a financial adviser and author of the bestseller Retire Today: Create Your Retirement Master Plan in 5 Simple Steps. He is also the host of the Retire Today podcast and the face behind the Mr. Retirement YouTube channel. Jeremy and his team have helped hundreds of people retire using his signature Retirement Master Plan, which helps you make more income, pay less in taxes and avoid big retirement mistakes. (Jeremy Keil is an Investment Adviser Representative of Alongside, LLC, d/b/a Keil Financial Partners, an investment adviser registered with the SEC. For more about Alongside LLC, see its Form ADV at the SEC's Investment Adviser Public Disclosure website.)