Grow your retirement savings with rising interest rates


Normally, the longer you tie up your money, the better your CD will perform. Currently, there is relatively little difference in yield between CDs of different maturities. The national average yield for a one-year CD is 0.82%, according to Bankrate, and the average yield for a five-year CD is 0.87%. High-yield CDs of all maturities range from 2.5% for six-month CDs to 3.65% for five-year CDs.

Most investors want to lock in high current yields with a long-term CD if they think interest rates won’t rise much more. Now is probably not the time to do so, says Greg McBride, chief financial analyst at Bankrate. “The Federal Reserve Board plans to raise interest rates another 1.25% this year,” he said. The Fed has raised its short-term federal funds rate five times this year, from a high of 0.50% to a high of 3.25%.

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For most people right now, the best bet is a savings account or a high-yield money fund. “If you’re a gambler, get the best rate on a savings account now and wait for the Fed to go into pause mode” before locking in returns with a CD, says Ken Tumin, founder of Depositaccounts.com.

3. Treasury securities

Treasury securities, which are federally guaranteed IOUs, also offer good yields. A three-month treasury bill yields 3.4% and a one-year treasury bill yields nearly 4%. Interest from Treasury securities is exempt from state income tax, but not federal income tax.

Treasury bills, which mature in one year or less, are issued at a discount, much like savings bonds. For example, you can buy a one-year $10,000 treasury bill for $9,750 and when the note matures, the government will pay your $10,000. Profit is your interest. Treasury bills, which have maturities greater than one year and less than 20 years, bear interest semi-annually.

You can buy treasury bills from a broker or directly (and for free) at treasurydirect.gov. Most brokerages also sell bank CDs and can be a good way to find high-yield CDs, Tumin says.

A downside of treasury bills: if you sell your treasury bills before they mature, you may get more or less than the face value of the security.

4. Money market UCITS

A money market mutual fund invests in short-term, high-quality, interest-bearing securities, such as treasury bills. Unlike a bank, which can fix a return for a certain period, money market funds can only give you what they earn, minus expenses. The typical money market fund returns 2.57%, according to Crain Data, which tracks the returns of the largest funds.

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