The Federal Reserve’s recent rate adjustments have led to near-record rates for savings accounts, money market accounts, and certificates of deposit (CDs). If you have to take a required minimum distribution (RMD) from your retirement plan but don’t need the funds immediately, there are several secure and profitable options to consider. High-yield savings accounts offer competitive rates, with the top nationwide rate currently at 5.50%.
These accounts are easily accessible and maintainable, although rates can change over time. Money market accounts work similarly to savings accounts but also offer check-writing capabilities. The current top nationwide rate for these accounts is 5.35%.
They generally provide high liquidity, though there may be limits on monthly withdrawals. CDs provide fixed interest rates for a specified term. The highest nationwide rate available now is 5.40%, but rates for longer terms might be lower.
Locking in a rate with a CD can be a good strategy for a guaranteed return over a longer period. I Bonds are government-issued securities that adjust their interest rates based on inflation every six months.
Smart ways to invest your RMD
Currently, new I Bonds are paying 4.28% for the first six months. They are a smart choice for long-term investors looking to protect their savings from inflation. While you have until December 31 to take your RMD for 2024, moving funds into a long-term investment sooner could be beneficial.
Rates for long-term CDs and I Bonds are expected to decrease, so locking in current rates might be advantageous. The Federal Reserve is expected to cut rates starting in its upcoming September meeting, which could lead to a full percentage point reduction by the end of the year. This will likely impact the interest rates for savings products, making now a good time to secure the best rates available.
All savings options mentioned are federally insured, meaning deposits up to $250,000 per person per institution are protected. This applies whether you’re using a bank or credit union. When choosing the right option, consider that high-yield savings accounts offer immediate access to your funds, money market accounts provide the flexibility of check-writing, CDs secure a fixed rate for a longer term, and I Bonds protect against inflation and can be held for up to 30 years.
Assess your financial needs and risk tolerance to decide which option or combination of options suits you best. By taking advantage of high current rates, you can make the most of your RMD funds.
