CD Alternatives - Tax Efficient Options for Short Term Savings

CD Alternatives
The recent rise in interest rates has greatly increased the attention that savers are putting into CDs, or certificates of deposits.
For many years, CDs offered very low rates and were not very attractive places to save. That is changing today, but before you buy, you should know about a few options that may be more beneficial than CDs depending on your finances.
First, know that there may be a tax benefit to using alternatives. That is because the interest from CDs will be taxed at income tax rates at the Federal level, and by your state.
Savings bonds and Treasury bills for example are not taxed at the state level. For those in high tax states, this means your after-tax return may be significantly better with treasury bills than CDs.
Liquidity may also be a concern for some as well. CDs typically have penalties for early withdrawals. Investments such as money markets can be sold at any time without penalties.
For those with cash savings above the FDIC limit, purchasing treasury bills also provides you a near limitless Federal government protection on your savings that would not exist if that money remained within a single bank.
And lastly, it can just be time consuming to be sure you are getting the best rate with CDs. It may mean having multiple CDs at multiple banks around town, and moving money around each time a CD matures to a new bank. Banks typically offer special interest rates for new money, but will renew you into lower yielding CDs at maturity.
Money within a brokerage account instead of a CD at a bank gives you the flexibility to move between a wide variety of investments very quickly and easily. And this helps keep your money consolidated into one easy to manage location.
Cash management is just one of the topics we cover with our clients on a fiduciary, flat fee basis. Our clients don’t pay any more to have us manage their cash balances in CDs, treasury bills, or other alternatives.
If we can help you determine the best options to get returns on your cash, please reach out.
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[@datrucksdavea2080]

T-Bills !

[@ArnoldMoteWealthManagement]

Yes, certainly a great option. Thanks for watching and for the comment.