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☆ What Today’s Fed Move Means for Savings Accounts and CDs
▼ + stars: | 2023-11-01 | by ( Steve Garmhausen | ) www.wsj.com time to read: +5 min

By Steve GarmhausenThe Federal Reserve’s decision to leave interest rates unchanged Wednesday means your savings accounts will continue to enjoy decades-high yields of 5% or more. The question of how long interest rates will remain robust matters to those making decisions about how to save. Savings accounts are attractive because balances are readily available for emergencies or planned expenses like a home down payment—but their interest rates can change quickly in response to Fed actions. Savings accounts vs. CDsThe best savings accounts and CDs were paying around half a percentage point of annual interest before the Fed started raising rates last spring. Safe, liquid alternatives to bank accounts include Treasury bonds—the one-year T-bill was recently yielding 5.4%—and money-market mutual funds, which yield a hair less.

Persons: Steve Garmhausen, it’s, “, ”, James Thorne, Brooke May, Daniel Wilson, Adam Stockton ,, you’ll Organizations: Wellington, Altus Private Wealth, Fed, City Locations: Altus, Indianapolis, Ind, Auburndale

☆ Why It Finally Pays to Keep Your Savings in Cash Again
▼ + stars: | 2023-10-12 | by ( Steve Garmhausen | ) www.wsj.com time to read: +5 min

By Steve GarmhausenGood news for savers: interest rates on high-yield savings accounts and CDs are beating inflation. Savings accounts and CDs, even the best of them, paid interest rates below the rate of inflation. If inflation is, say, 5% and your savings account pays 1%, $1,000 in cash will be worth just $960 in a year. The average savings account interest rate is just .42% and the typical one-year CD pays 1.72%. “The difference between an online savings account and the average brick and mortar account is huge right now,” says Tumin.

Persons: Steve Garmhausen, ”, Ken Tumin, they’ve Organizations: Federal, Fed, Capital, City Credit Union, Bond Fund, ETF

☆ What the Fed’s September Rate Decision Means for You
▼ + stars: | 2023-09-20 | by ( Steve Garmhausen | ) www.wsj.com time to read: +5 min

By Steve GarmhausenThe Federal Reserve elected on Wednesday to keep interest rates steady, and that’s good news for savers: It means they’ll continue to enjoy the best rates in more than two decades. There’s more good news: The market, which just a few weeks ago expected rate cuts to start early in 2024, now doesn’t expect cuts until midyear. “There are several options to get at least 5% on your liquid cash, and that should stay around until the Fed cuts rates,” says DepositAccounts.com founder Ken Tumin. Meanwhile, inflation remains well above the Fed’s preferred rate of 2%, providing another reason for it to keep rates high. The fed-funds rate is the interest rate at which banks lend reserve balances to each other overnight.

Persons: Steve Garmhausen, ”, Ken Tumin, “, Michael Yoshikami, Banks, don’t Organizations: Federal Reserve, —, Fed, BMO Alto, Federal Deposit Insurance Corp Locations: Walnut Creek, Calif

☆ Should I Ditch Bonds for Money-Market Funds or CDs?
▼ + stars: | 2023-09-11 | by ( Steve Garmhausen | ) www.wsj.com time to read: +5 min

By Steve GarmhausenIs it reasonable or even wise to shift some of your bond allocation to money-market funds paying over 5%? The broad bond market had its worst year ever in 2022, as reflected by the AGG—the iShares Core U.S. Bonds vs. money-market fundsSo should you really sell bonds and use the proceeds to buy these products? Bonds have also performed better historically than the “cash” category, which includes money-market funds. Money-market funds are considered a low-risk investment, and one that’s easy to sell if you need cash.

Persons: Steve Garmhausen, Bonds, Amita Desai, ”, Adrianne Yamaki, Brent Weiss, Aswath Damodaran, Weiss, you’ve, Yamaki Organizations: Aggregate, Federal Reserve, Money Market Fund, Treasury, New York University Locations: Demarest, N.J, San Francisco, Baltimore, “, New Jersey

☆ Where to Move Your Savings Now That the Fed Has Raised Rates Even Higher
▼ + stars: | 2023-07-26 | by ( Steve Garmhausen | ) www.wsj.com time to read: +5 min

But rates on savings accounts and certificates of deposit could start to fall before long—so it might make sense to lock in today’s rates soon. That means that it could become a lot harder to find savings accounts and certificates of deposit paying the most attractive rates. “I think we’ve already broken past the peak,” says Sander Read, a financial advisor in Winter Park, Fla.Where are interest rates headed next? What do higher rates mean for savings accounts and CDs? The reason: Banks that need to raise more cash to make loans are more likely to dangle higher interest rates to get it.

Persons: Steve Garmhausen, ”, Sander Read, Keith Larkin, Ken Tumin, “ Organizations: Fed, Federal Deposit Insurance Corp, Bank, Treasury Locations: Winter Park, Fla, San Francisco, Bank

☆ What the Fed Rate ‘Pause’ Means for Your Money
▼ + stars: | 2023-06-14 | by ( Steve Garmhausen | ) www.wsj.com time to read: +6 min

By Steve GarmhausenFor months consumers have watched interest rates steadily climb. “This is the Fed just kind of waiting and seeing,” says investment adviser Brian Frank, in Key Biscayne, Fla.What does the Fed ‘pause’ mean? While no one knows where interest rates are headed, here is how to prepare yourself for three basic scenarios. If the Fed pulls away the football, stock prices could retreat. In that case, folks with higher mortgage rates can eventually refinance.

Persons: Steve Garmhausen, ”, Brian Frank, you’ve, Jon Foster, “, can’t, Frank, you’ll Organizations: Federal Reserve, Fed, won’t, Nasdaq Locations: Key Biscayne, Fla, Los Angeles

☆ Should I Choose My Home State’s 529?
▼ + stars: | 2023-05-26 | by ( ) www.wsj.com time to read: +5 min

Why your home state’s 529 can make senseThere are several reasons college savers usually prefer to use their home state’s 529 plan. What to know about Pennsylvania’s 529Pennsylvania’s 529, known as the PA 529 College and Career Savings Program, is quite good by all accounts. A big reason: Pennsylvania residents who fund the in-state 529 plan are eligible for a number of valuable benefits through the state’s SAGE Scholar Program, which aims to help Pennsylvania families afford higher education. The program lets participants earn points that translate into an annual reward of up to 10% on the account value of your Pennsylvania 529. But don’t sweat it if you can’t contribute as much as you’d like to your child’s 529 plan every year.

☆ The Fed May Be Done Raising Rates. Here’s What It Means for CDs and Savings Accounts
▼ + stars: | 2023-05-03 | by ( ) www.wsj.com time to read: +5 min

So, if you don’t need immediate access to your savings, it may make sense to lock in current interest rates with a CD. And while the pace of price increases remains well above the Fed’s preferred level of 2%, the central bank fears that raising interest rates any more could tip the fragile economy into recession. The likely explanation is that banks expect interest rates to decrease and don’t want to be locked into paying higher rates for extended periods of time. It’s true that if CD rates are, say, 3% a couple of years from now, then a 4.5% yield will look very good. And because falling interest rates tend to drive up bond prices, that’s what they’d likely do.

☆ Now Is the Time to Lock In CD Rates, Experts Say
▼ + stars: | 2023-04-20 | by ( ) www.wsj.com time to read: +5 min

But with lower interest rates on the horizon, savers don’t have much time to make up their minds. “If you wait and interest rates come back down, those rates on CDs would also come down,” says financial advisor Ed Cofrancesco, in Orlando, Fla.CD rates are up—for nowFor years, CD rates languished at paltry levels. That’s because bonds’ market value traditionally rises as interest rates fall. But if the Fed does cut rates later this year, you will likely have to reinvest your cash at a lower rate. In another scenario, a recession could send inflation and interest rates plummeting, making those who bought three-year CDs seem like geniuses.

☆ Interest Rates Are Still Going Up—And That’s Good News for Savers
▼ + stars: | 2023-03-22 | by ( ) www.wsj.com time to read: +6 min

But they’ve cheered savers by breaking a decadelong streak of near-zero returns on cash parked in savings accounts, CDs and the like. Where interest rates are headed nextThe opportunity might not last. The fed-funds rate, which banks use to set savings and CD rates, now appears more likely to fall than rise further. What it means for your moneySavings and CDsGiven the likelihood that we’re at peak interest rates, using CDs to lock in high yields may be a good idea. On the home buyer front, the median sale price of an existing home fell 12.3% between June and February as higher mortgage interest rates weakened demand.

☆ Finally! Savings Rates Could Soon Beat Inflation
▼ + stars: | 2023-02-23 | by ( ) www.wsj.com time to read: +6 min

Why savings rates could rise in 2023Fortunately, many experts predict the situation will reverse, with inflation on a downward trend even as the Fed continues nudging up interest rates. Since the most generous banks have increased their rates in tandem with the Fed, they would likely increase savings rates as well. Bottenfield doesn’t see savings account interest rates surpassing the rate of inflation before 2024. “The difference between an online savings account and the average brick and mortar account is huge right now,” says Tumin. If you think interest rates will fall, you can lock in mid-4% rates long-term with a five-year CD.

☆ How Much Should I Have in Savings?
▼ + stars: | 2023-02-07 | by ( ) www.wsj.com time to read: +10 min

And when you are ready to stop working, a healthy retirement savings account will allow you to maintain financial independence. How much should I have in retirement savings? Retirement Savings Targets by Age Saving 10 times your salary doesn't have to seem overwhelming. So how do you translate that into a savings goal? Retirement savings should be prioritized over college savings, says Fruzzetti: “In an ideal world, you’d be able to save enough for retirement and college concurrently, but that’s not always possible.” The most realistic plan for many families is to save as much as possible.

☆ How High Will Savings Rates Go in 2023?
▼ + stars: | 2022-12-08 | by ( ) www.wsj.com time to read: +6 min

By Steve GarmhausenInterest rates on savings accounts have been rising fast, and savers are likely to see more improvements in 2023. Where are interest rates headed in 2023? Will savings rates go up in 2023? Though they take their cues from the fed-funds rate, banks tend to take weeks or even months to hike their savings account rates. The Fed could cut rates sooner than expected, pulling savings rates down in the process.

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