where to put $100k?

June 12, 2022 11:11 AM

So I am in the fortunate position of having $100k sitting in checking that I would like to stick somewhere. Normally I would put it all into index funds, but at the moment putting money into the market seems like a risky move. I'd like put this money somewhere safe and accessible while also gaining at least some interest. Are there any good high yield savings accounts or something similar people can recommend?
posted by crazy with stars to Work & Money (8 answers total)

at the moment putting money into the market seems like a risky move

Putting money into equities is always a risky move. Timing the market is highly likely to fail. The vast majority of full time/educated market professionals cannot time the market successfully - there's almost no reason to think you can either. If your timeframe is sufficiently long, there's no reason not to put it into broad market index funds, even right now. Correspondingly, if your time frame is short, there's no reason to put money into those index funds, even during other times. Historically, in the USA, time periods of >10 years have, with very high probability, resulted in positive returns. If you extend that to >20 years, historically you will always have a positive return, even when accounting for inflation.

I'd like put this money somewhere safe and accessible while also gaining at least some interest.

You are likely a prime candidate for I Bonds. Right now, they pay 9.62% interest. However, you can only buy $10K of them per year, and you will have to wait a year to withdraw the money from them.

FDIC-insured checking/savings accounts are about as safe/accessible as you can manage, but finding one paying >1% interest for a $100K balance is pretty hard.

You may consider a CD (Certificate of Deposit). You can get these from most major banks, and it looks like that will get you 1.5-2.5% interest right now. You will want to understand the withdrawal requirements; often times withdrawal from CDs will result in you not earning interest for the previous 3 months. Also, many banks do not allow you to withdraw portions of a CD, so you might want to set up multiple CDs to allow for partial withdrawal.

Moving one step less liquid (harder to withdraw), you may consider brokered CDs or bonds. These are loans to banks or the government that will only return the money you put in (the "face value") at the expiration of a term (varying from 6 months to 30 years). Because these are bought/sold by brokerages, you can buy/sell the CD/bond on the market if you need to - however, you may end up selling it for less than (or more than) face value. Right now, agency bonds (loans made to government-sponsored companies) pay ~3.5% interest for a 3 year term. You can also buy a bond directly to the US Treasury - essentially the safest bond you can possibly buy. Treasury bonds right now will pay ~3% interest for a 3 year term ("nominal bonds) or 0% inflation-adjusted interest for a 5 year term (TIPS bonds).
posted by saeculorum at 11:32 AM on June 12, 2022 [15 favorites]

I'd still put it into index funds.

What is your investment horizon?
posted by Ahmad Khani at 11:50 AM on June 12, 2022 [6 favorites]

However, you can only buy $10K of them per year, and you will have to wait a year to withdraw the money from them.

Also, if you withdraw in less than five years, you lose the last three months' interest.

Otherwise, 100%.
posted by praemunire at 11:59 AM on June 12, 2022 [3 favorites]

If you're married/partnered and are comfortable sharing this money with your spouse/partner, you can purchase $10,000 in I Bonds each year for them as well.

I shopped around for high yield savings accounts and CDs last fall and ended up at Lending Club, which recently raised its interest rate to a whopping 1% for balances over $2,500.
posted by Sweetie Darling at 3:25 PM on June 12, 2022 [2 favorites]

I’ve had good luck with index funds over the long term, but they are risky over the short term. If you want to use that money for a down payment, to start a business venture, or for emergency, index funds would not be my choice. They’re good for accumulating a retirement nest egg.

I would suggest looking into income funds through Vanguard or another low expense broker. Look at the historical data to see how well the fund weathers recession, in case you need the funds sooner than expected.
posted by coldhotel at 4:08 PM on June 12, 2022

If CDs suit your needs, this site is the one I like for finding the best rates. Change the term, amount, and other options to suit your situation. (If that 3.21% 5-year one looks good to you, I’ve had other CDs with Connexus and they’ve been fine.) BUT I agree that if your horizon is much longer than that, then you shouldn’t avoid index funds in an attempt to time the market.
posted by daisyace at 7:24 AM on June 13, 2022 [1 favorite]

I like keeping my money in a high-interest money market account (it's just like a savings account). See here. You link these to another current bank account, and transfer money back and forth through that. Mine limits my transactions per month, which is no big deal, as it's mostly a holding place. I found that the rates on these are essentially the same as that of a CD, without the restrictions. That 1% interest really makes a difference over traditional savings accounts of .1%, for example.
posted by hydra77 at 8:01 AM on June 13, 2022

Similar question with good answers, here:
https://ask.metafilter.com/362568/Retirement-investment-strategy-for-52-year-old-late-to-the-game
posted by 4midori at 10:59 AM on June 14, 2022