Question: I recently found out I was receiving $50,000 from a family member. My retirement is already fully funded, I have no debt to pay off, and I don't need to use the $50,000 for anything immediate. Where are some smart places to store it to keep ahead of inflation?
Answer: My first suggestion would be to invest it in an index fund since they offer historically higher returns than savings accounts. However, if you're concerned about market volatility, there are a few other solutions that would work best for you. Depending on your savings goals, a high-yield savings account or finding the best CD rates are smart options to consider for large deposits of $50,000 or more.
Each approach helps you earn returns that outpace inflation while eliminating risk. I'll show you these scenarios to consider, depending on your investing or savings profile.
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Scenario 1: I don't mind a little risk if there's a chance of a higher reward
I recommend investing in the stock market through an index fund, in the vehicle of an exchange-traded fund (ETF) or mutual fund, if you want high returns and are OK with some risk.
The advantage is diversification. If you choose an index fund that tracks the S&P 500, for example, that fund would hold the approximately 500 biggest U.S. stocks, rather than putting all your eggs in one company's basket. Index funds also have lower or no fees since they're passively managed.
But there are a few considerations before diving in. First is that your return is not guaranteed. If the index performs poorly, your returns will decline as well. Although as a point of reference, the S&P 500 has historically averaged about a 10% annual return.
The bigger concerns, though, revolve around timing. That 10% return is an average, meaning some years it's higher and some years it's lower or even negative. If you find yourself needing to use this money in a bad time for the market, you'll lose out on returns.
The other timing issue is the capital gains tax, which you'll have to pay on what you earned when you sell your holding: If you hold the index fund for less than a year before selling it, you'll be subject to short-term capital gains rates, which are higher.
Altogether, this means you should think carefully about whether you are OK with tying up this inheritance money for at least a year. If you're not sure, consider one of the other scenarios below. However, if you're willing to take some risk to maximize returns and are sure you'll hold for more than a year, this would be a wise option.
Scenario 2: I want to park the cash and forget about it
If you're already on course to achieve your retirement goals, and you have a healthy amount in your emergency fund (at least six months of expenses), there's no reason to go with anything but a long-term CD.
Why? While it's likely CDs won't earn you the same return as a low-risk ETF or other investment vehicle, they're lower-risk solutions for savers wanting to keep all of their money. Now is the best time to lock one in, as rates are subject to change soon.
The Federal Reserve issued its second rate cut of the year at its meeting last week. Because it takes banks some time to adjust their rates, you can still find five-year CDs with rates higher than 4%.
Use this Bankrate tool to compare and find your best option quickly:
What happens if you need the cash before the CD matures? You'll pay a significant early withdrawal fee. On a five-year CD, your penalties could be anywhere from six months to one year of earned interest, equating to hundreds of dollars lost. So, only do this approach if it works for your cash flow.
Recommended account: SchoolFirst Federal Credit Union has a five-year CD with a 4.15% APY. You'll make $11,272.61 in earned interest with a $50,000 deposit if you lock it in today.
Scenario 3: I want to earn a higher rate with cash flexibility
In an uncertain economy, it makes sense to prioritize flexibility. After all, inflation could continue to climb in 2026, and if the Fed continues to cut rates, eventually we'll reach the point where you're not earning enough on your savings to stay ahead.
This is why I recommend a no-penalty CD. As its name implies, you'll have the flexibility to access your cash as you need it without the harsh fees. How it works is you'll need to keep your cash in for a week to a month at the start. You'll also want to pay attention to account terms, as some banks allow you to withdraw all of it after you reach the initial vesting period, while others allow one withdrawal per month.
The benefit of this approach is that you can earn a higher rate of return that'll outpace inflation. With terms between six months to a year, you'll have quick access back to your cash as well.
Recommended account: Climate First Bank offers a six-month no-penalty CD with a 4.34% APY, where you'll earn $1,073.48 in interest.
Scenario 4: I don't want to tie any money up
If you want access to your money at all times, chances are a CD might not be the best fit for you. Instead, you'll want to consider a high-yield savings account.
A high-yield savings account differs from a CD in that it comes with a variable interest rate. It means if the Fed decides to cut rates again, it could impact how much you can earn from one.
That said, now is an excellent time to sign up for one. I review rates weekly, and some accounts still have APYs far above 4%. Use this Bankrate tool to find the best savings account for you:
Furthermore, it's a great way to protect your $50,000 without having fees eat into it. Many of the best high-yield savings accounts come with no fees or account minimums. And you can always sign up for a checking account to access funds quickly with a debit card, should you go with an online bank.
Recommended account: Newtek Bank offers the best rates at 4.35%, with no minimums or monthly fees. If you store $50,000 in it for a year without any rate cuts, you'd earn $2,222.86.
Ultimately, if you plan to receive a larger sum of money and have your retirement and emergency savings fully funded, these are the best options to consider. An index fund has the chance of the highest return but some risk, and of the guaranteed-return options, CDs will earn you the most over time as you can lock in rates while they're still higher.
However, it's also tempting to go with a high-yield savings account. While you run the risk of having rates lowered in the future, it also gives you flexibility to pivot to higher-earning investments if need be — or to spend the money when you decide to. This is why prioritizing your savings goals upfront can direct your path.
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