7 High-Yield Savings Options for Retirees

There are a lot of good reasons to hold cash, especially for those in retirement. An emergency fund is a must. And retirees need to keep a certain amount of cash for spending since paychecks have stopped or been reduced. Whatever the reason, the big question is where can earn the most interest on your cash.

Here are seven excellent options for short-term investments for your money. I've used most of them from time to time.

Cash Investment Options Compared

Option	Current Yields*	Tax	Liquidity
T-Bills	5.16% to 5.37%	No state income taxes	1 to 3 days
No-Penalty CD	5.15%	Yes	1 to 2 days, after an initial period of 14 to 30 days.
Savings Account	5.55%	Yes	Immediate, unless transferring from online bank, then 1 to 3 days
Money Market Account	5.35%	Yes	Immediate, unless transferring from online bank, then 1 to 3 days
Checking	5.00%	Yes	Immediate
Money Market Funds	5.27%	No state income taxes if invested in U.S. government bonds	1 to 3 days, although some have check writing privileges
Term CDs	Varies	Yes	1 to 3 days

Best Short-Term Investments for Saving Cash

1. U.S. Government Treasury Bills

Treasury bills, also known as T-bills, are U.S. government bonds that mature in one year or less. The government issues them in terms of 4, 8, 13, 26, and 52 weeks. They are zero coupon bonds. You buy them for less than face value and receive the face value when the bond matures. The difference represents your interest.

You can buy Treasury bills via Treasury Direct, but I wouldn't recommend it. The website is a mess. A better approach is to buy them through your broker of choice. Fidelity, Schwab and Vanguard are all reasonable options.

T-bills are my current choice for most of our cash. The yields are above 5% for all durations. These yields change daily, so be sure to check out current yields here. In addition, you pay no state income tax on the interest.

2. No-Penalty CD

I've used no-penalty CDs from time to time. As the name suggests, a no-penalty CD doesn't charge a penalty for early withdrawal. You get the higher yields of CDs with the flexibility to pull your money out at any time.

Typically you pay for this no-penalty feature with a slightly lower APY. Right now, however, the best paying no-penalty CDs have yields above 5%. You'll find a list of no-penalty CDs at my other site, doughroller.net.

3. High-Yield Savings Account

For those who want a straight up savings account, there are several today that pay north of 5.00% APY. The highest APY I can find on a savings account available nationwide without savings caps is My Banking Direct (5.55% APY). Let me know if you find a better offer.

You can also check out a huge list of options here.

4. High-Yield Money Market Account

When it comes to saving cash, there really is no difference between an FDIC-insured savings account and an FDIC-insured money market account. Sometimes, however, you'll find that one or the other pays a slightly better rate.

The best MMA rate I can find comes from the Brilliant Bank (5.35%).

5. High-Yield Checking Account

If you want to keep your money in a checking account, there are some high-yield options. One of the best rates out there is from Wealthfront (5.00% APY). The account comes with a debit card, no account or overdraft fees, bill pay, direct deposit, and up to $8 million in FDIC coverage. You can also send and deposit checks.

6. Money Market Funds

Money market funds are another excellent option for cash that I use. Unlike a money market account, they are not FDIC insured. The do, however, invest in short-term very safe fixed income investments. In addition, you can choose a money market fund that invests primarily in short-term U.S. government bonds for added security.

Here are two money market funds that I like, with yields as of the date of this article:

• Vanguard Federal Money Market Fund (VMFXX): The 7-day SEC yield is 5.27% and there is a $3,000 investment minimum.
• Fidelity® Government Money Market Fund (SPAXX): The 7-day SEC yield is 4.95% with no minimum investment requirement.

One benefit of a money market fund is that you can keep it with your broker, assuming they offer one with a competitive yield. This allows you to keep you money all in one place. Here. Fidelity is the better option because it has some great cash management accounts as well, including a credit card and checking account. Vanguard, sadly, doesn't offer these features.

7. Term CDs

I mentioned no-penalty CDs earlier. If you know you want to keep money locked up a bit longer, longer-term certificates of deposit are a good option. You can also create a CD ladder, which gives you the benefit of longer-term yields and penalty-free access to your money as each CD matures.

What's interesting about the CD market today is that long-term CDs have lower yields than those with shorter terms. For example, the best 1-year CDs currently pay over 5%, while 5-year CDs are under 5%. That's because the yield curve is inverted, which won't always be the case.

You can check out over 1,000 CDs here.