Here at Wall Street Watchdogs, we give you lots of useful information about how to invest your savings to prepare for a comfortable retirement.
But what happens when you actually get there? What do you do with your nest egg after retirement?
This aspect of financial planning is just as important as building a nest egg in the first place — but it’s much less talked about.
And that’s a shame, because withdrawal strategies are complicated. Each of them has downsides. Whether you go the annuity route, the “withdraw 4% a year” route, or the “buy bonds and live on interest” route, there are market risks to consider.
But if you have a big enough portfolio when you retire, there’s a fourth option — one that’s much safer than the three conventional retirement account withdrawal strategies above.
You can put your money in a high-yield, FDIC-insured certificate of deposit (CD) or savings account. That means you’re living on guaranteed interest payments, and your principal is insured by the federal government for up to $250,000 per depositor, per bank.
The only problem is that it’s often difficult to find FDIC-insured accounts with yields high enough to live on — particularly in the current low-rate environment.
That’s why we’ve put together this report and why we’re updating it monthly with the best CDs and savings accounts for retirees. Before we get to those accounts, let’s go over the kind of numbers and terms we’re looking for…
What to Look For in an Account
Each of these accounts pays an annual percentage yield (APY), and most have deposit or balance minimums. Each account also has a unique system of fees, terms, and conditions that will be outlined in its “Notes” section below.
Annual percentage yield (APY) is the rate of return adjusted for the effect of compounding interest. Some of these accounts compound their interest more or less frequently than one year. That’s why we use APY — it provides a more accurate measure of how much your money will actually grow in a year than the account’s nominal yearly interest rate.
Minimum deposits and balances are fairly self-explanatory — they’re the smallest amounts of money you can keep in a given account without being cashed out or penalized with additional fees or a lower interest rate.
You generally can’t open these accounts unless you meet the minimum deposit. Some of them penalize accounts that fall below a minimum balance threshold after opening.
Certificates of deposit (CDs) also have term lengths. These are periods of time in which you must keep your money in the CD in order to earn your full interest and the full return of your principal. Cashing out of a CD before the end of the term length often results in a penalty.
High-yield savings accounts and money market accounts — the other instruments covered in this report — do not have term lengths. Some of them do, however, have limits on the numbers of transfers you can make each month.
We’ll tell you about any fees, penalties, minimum balance conditions, transfer restrictions, and other special rules in the “Notes” section of each account.
Without further ado, let’s look at the top five highest-yielding CDs for March 2019…
Certificates of Deposit (CDs)
Sallie Mae CD
APY: 3.00%
Term length: 24 months
Minimums: $2,500 minimum deposit (and minimum balance for APY)
Fees: None unless withdrawing early
Notes:
This is a simple but competitive CD with an automatic renewal option. It also has a fairly standard penalty for early withdrawals — just 180 days’ simple interest on the amount withdrawn.
BankDirect CD
APY: 2.98%
Term length: 24 months
Minimums: $10,000 minimum deposit
Fees: None unless withdrawing early
Notes:
This is another simple CD with a fairly standard penalty for early withdrawals — just 180 days’ simple interest on the amount withdrawn.
Rising Bank CD
APY: 2.95%
Term length: 24 months
Minimums: $1,000 minimum deposit (and minimum balance for APY)
Fees: None unless withdrawing early
Notes:
This is another simple CD with a fairly standard penalty for early withdrawals — just 180 days’ interest on the amount withdrawn. There is also a $500,000 account maximum (the FDIC only insures you for up to $250,000 per depositor per bank, so you shouldn’t have that much in one account anyway).
Banesco USA BaneSmart CD
APY: 2.95%
Term length: 24 months
Minimums: $1,500 minimum deposit
Fees: One-time fee upon opening based on account balance. $300 for accounts under $45,000; $250 under $75,000; $200 under $150,000; $100 over $150,000.
Notes:
This is another simple CD with a fairly standard penalty for early withdrawals — just 180 days’ interest on the amount withdrawn. There is also a $250,000 account maximum; that’s equal to the FDIC insurance limit per depositor per bank.
Citizens Access
APY: 2.95%
Term length: 24 months
Minimums: $5,000 minimum deposit
Fees: None unless withdrawing early
Notes:
Another simple CD with a penalty of 180 days’ interest for early withdrawals.
Now let’s look at the other types of high-yield, FDIC-insured accounts…
Savings and Money Market Accounts
Investors Bank eAccess Money Market Account
APY: 2.50%
Minimums: None disclosed
Notes:
This is a high-yield savings account with a limit of six transfers per month or $250,000 in withdrawals per month.
Customers Bank High-Yield Savings Account
APY: 2.50%
Minimums: $25,000 minimum deposit (and minimum balance for APY)
Fees: Available about ⅔ of the way down this page
Notes:
This is a simple and useful high-yield savings account with a standard schedule of fees and a limit of six transfers per month.
Banesco USA BanesGrow Savings Account
APY: 2.47%
Minimums: $100 minimum deposit, $300 minimum balance for APY
Fees: $5 per month if balance is below $300. $10 per transfer beyond the limit of six transfers per month.
Notes:
This is a simple and useful high-yield savings account with a standard schedule of fees and a limit of six transfers per month.
Vio Bank High-Yield Online Savings Account
APY: 2.46%
Minimums: $100 minimum deposit
Notes:
This is a simple and useful high-yield savings account with a limit of six transfers per month.
Rising Bank High-Yield Savings Account
APY: 2.45%
Minimums: $1,000 minimum deposit (and minimum balance for APY)
Fees: None disclosed
Still not satisfied?
These accounts provide FDIC-insured peace of mind, easy access to your money, and higher yields than you’ll get from the vast majority of bank accounts.
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