Retirement accounts often require minimum distributions (RMDs) after a certain age, generally taken by December 31 of each year to evade hefty penalties. However, today's high interest rate environment opens avenues for those who can afford to reallocate their RMD to different saving methods. Due to the expected decrease in interest rates by the end of the year, investing in other savings tools now might pay off.
Certificates of Deposit (CDs), for instance, offer a fixed rate of return that can be incredibly worthwhile when rates are predicted to drop, as in the current scenario. Banks are likely to establish new CDs with lower rates as soon as a Federal Reserve's cut in interest rate is predictable, hence, securing a CD at this point is a wise decision.
If you can't commit to a CD, a high-yield account can be a viable option. At present, numerous options are available to earn returns of around 4% and even 5%, while having the flexibility to withdraw funds as needed. Savings services like Investopedia make it convenient to find the highest-paying flexible cash accounts from a plethora of FDIC-insured banks and credit unions.
Alternatively, a money market account can be considered for the ability to have a check-writing facility on savings, although these accounts often yield lesser than the top high-yield savings options.
Do bear in mind, however, that savings account rates fluctuate over time and depend on the Federal Rate. Hence, there’s a lack of guarantee in regards to future profits.
An unconventional option can be a checking account, which usually doesn't provide high returns, however, certain banks offer up to 5.00% APY for specific deposit-based requirements.
It is crucial to be aware that the 'top rates' mentioned are from the extensive daily rate research on numerous banks and credit unions, and are distinct from the overall average.
Certain eligibility criteria apply while considering banks and credit unions. For instance, the banks need to be operational in at least 40 states and the required donation for membership shall not exceed $40 for credit unions.