Personal FinancePixel-Shot / Shutterstock.comMaurie Backman
Even though interest rate cuts have begun, high-yield savings accounts are still paying generously.
If you’re at a stage of life where you need steady, predictable income, a savings account is a good bet.
You may want to take some of your recent stock market gains and convert them to cash instead.
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Although the past few years have been brutal for borrowers from an interest rate perspective, they’ve been fantastic for people with money in the bank. For much of 2023 and 2024, 5% CD rates were the norm, and many high-yield savings accounts paid similarly.Now that the Fed has begun cutting its benchmark interest rate in response to cooling inflation, we’re not seeing quite the same payouts out of CDs and high-yield savings accounts. But there’s still plenty of money to be made in the bank.Why it pays for some people to load up on cashWhen you’re working toward a long-term goal, like building a retirement nest egg, it’s important to invest in a manner that’s likely to outpace inflation. A savings account generally won’t get you there, which is why most long-term savers should rely on a stock portfolio or broad market ETFs to reach their goals.But in certain scenarios, it’s better to go heavy on cash. If you’re socking money away for a near-term goal, you may not have time to ride out a period of stock market volatility. So in that situation, a high-yield savings account could be a much safer bet.It’s also a good idea for near-retirees and retirees alike to go heavy on cash. When you’re at a stage of life when you’re reliant on your nest egg to cover expenses, you don’t want too large a percentage of it tied up in the market. Having extra cash on hand buys you protection in the event of a market crash. In fact, since the S&P 500 is coming off of a solid year, it may be a good time to cash out some gains in your portfolio and put that money into a high-yield savings account instead.How much money can you make from a high-yield savings account today?The one tricky thing about putting money into a high-yield savings account versus a CD is that your interest rate can fluctuate. And if the Fed continues to cut interest rates this year, we could see savings account rates fall from where they are today.But let’s be optimistic and say that rates will hold steady at 4%. In that case, here’s the amount of interest you might earn this year.Savings Balance
Interest Earnings After 12 Months (Assumes 4%)
$5,000
$200
$10,000
$400
$50,000
$2,