Savings account or CD?

[april47]

I am retired and living on SS alone although I will also receive a small pension in another year. My expenses are minimal and I actually am managing to live on it without a problem and am perfectly happy with what I have and don't have. I have approximately $30,000 sitting in a savings account making practically nada in interest. I don't want to do the stock market thing. I am afraid to and I would like to remain somewhat liquid for medical emergencies,etc. My thought is to keep $10,000 in the savings account and get a $20,000 CD. Suggestions?

[Plain Old Petunia]

Do you currently have your savings at an online bank such as ING, Ally, Emigrant, etc.? If not, move it there immediately. The interest rate on savings and CDs is much better than at a brick and mortar bank.

You might consider laddering your CDs. For example, you might put some in a 1 year cd, some in a 2 year, etc., out to 5 years. Another strategy is to divide your balance by 13, keep one part in savings, put one part in a 1 year cd this month, one next month, etc, until you have 12 1 year cds one maturing each month.

You might also consider putting some of your money in a short-term bond fund.

[Peace Of Mind]

Why not consider a Money Market Account? Not a Fund but an account. The rates are about the same as a short term CD, you can write 3 checks a month with no charge, and your money won't be locked in for any period of time, nor are there penalties for withdrawing your money as long as you keep it to 3 times per month allowed. I have one with Capital One and their rates lately are over 1.10 percent. You can put about $10K in a MMA and the rest laddered in CD's as somebody else suggested.

[Peace77]

American Express is currently paying 1.3% on its high yield savings accounts.

You can compare rates for CD's at www.Bankrate.com

I agree with laddering the CD's as explained above. That way if you need your funds and cash it in before the due date, you will only lose the interest on the shortest one. If you only have one CD you will lose all the interest on it.

[princessleia]

you might want to consider a high yield rewards checking a/c (go to . Mine pays a 2.75% for up to $20,000 and all I have to do is to have a direct deposit (or ACH transfer) and 12 debit/credit transactions a month. Btw, if you go have online internet bank a/c (such as HSBC, ING, etc)....it is easy to arrange monthly direct deposits into the rewards checking a/c. ;D Earning $600+ in interest alone last year from my a/c was quite satisfying. And the best part is that I do have quick access to it (and these a/c typically rebates you the fees incurred when you use any ATMs)
Some of these banks offering these a/c are all highly rated by the bauer financial system. You can check the rating of the bank on their website before you plonk your $$$ into the bank if you are worried.

[Peace77]

There is no good reason to use a money market fund outside a bank. You will give up insurance and you are getting in many cases, a much worse yield. Skip this for now.

A money market account and a money market fund are NOT the same thing.
A money market account is insured and perfectly safe. A money market account is sometimes abbreviated MMA.

The previous poster clearly said "not a fund".

[Peace Of Mind]

Jan 24, 2011 9:14:55 GMT -5 Peace77 said:

There is no good reason to use a money market fund outside a bank. You will give up insurance and you are getting in many cases, a much worse yield. Skip this for now.

A money market account and a money market fund are NOT the same thing.
A money market account is insured and perfectly safe. A money market account is sometimes abbreviated MMA.

The previous poster clearly said "not a fund".

Thank you, Peace77!

Toughtimes: Please reread my post. You are clearly mixing the two accounts up. MMA (Money Market Account) is FDIC insured and allows 3 withdrawals (by check if need be) a month.

[Plain Old Petunia]

Jan 24, 2011 9:31:30 GMT -5 @toughtimes said:

I am referring to traditional money market funds, not money market accounts in banks. The previous poster suggested switching to the uninsured accounts.

She didn't, though. She said MMA, and then said "not a fund".

IMO, you are quite right that MMFs are not a good idea at this time.

[Peace Of Mind]

Thanks, petunia100!! I don't know how to make my post any clearer.