MW Here's where you can find higher yields on your cash now, as Fed cuts loom and CD rates are already falling

Andrew Keshner

The 'golden age' of cash is ending, but there are still good options for savvy savers

If CDs aren't a "home run" for savers anymore, what's the next move?

Savers and cash investors fell in love with certificates of deposit in recent years, but some financial advisers say it's time to look around as interest-rate cuts loom.

Don't view it as a breakup. Just a reminder that there are other fish in the sea for savers who want high yields at low risk.

After buying CDs for clients for several years as yields climbed past 4% and into 5%, New Orleans financial planner William Nunn eased off those purchases early this year. "It's not a home run anymore," said Nunn, founder of Horizon Financial Planning.

Now, for clients seeking "very long-term parking" for their cash, he's looking at high-quality corporate debt and municipal bonds as places to conservatively earn a nice yield.

With a CD, a customer deposits money at a bank for a set period of time. In exchange, they can earn higher interest rates compared to what they would collect on a savings account. CDs can help people get a return on cash earmarked for an upcoming event, like a home's down payment.

But CDs don't have to be the only way.

Patrick Huey, owner of Victory Independent Planning, recently worked with a client on what to do with money from a CD finishing its lock-up period. Because we're now at the end of what Huey called a "golden age" for cash, he and the client decided to put the money into an insurance product, a multi-year guaranteed annuity, with a return over 5%.

The Federal Reserve is widely expected to reduce its benchmark interest rate Wednesday for the first time in 2025, and then continue with other cuts before year's end.

The question is how deep the central bank will cut amid a weakening job market and ongoing concerns that tariffs will push up prices for businesses and consumers.

In this context, experts say building up emergency reserves in highly liquid savings accounts remains just as important as ever - even if the yield on that money is not as large as it used to be. "When you need your money, you need your money. You don't need questions," said Nunn.

But then the question is, how can you make the most of cash that you don't need immediate access to, but that also isn't destined for long-term plans like retirement? What are the other options, aside from CDs, for these cash savers?

There's the Treasury market, for starters

Huey has already been buying up short-dated Treasurys, holding them to maturity, taking the interest and then rolling the cash back into more Treasurys. That was a solid plan when the government debt yielded 4%, and it's still a solid plan at 3.5% or 3%, he said.

A six-month Treasury bill BX:TMUBMUSD06M yielded 3.82% and a one-year Treasury bill BX:TMUBMUSD01Y yielded 3.62% as of Tuesday.

The strategy is "still getting a decent return risk-free on the safe money portion of your portfolio," he said. Bank deposits get FDIC coverage, while Treasury debt is backed by the full faith and credit of the federal government.

Remember the tax edge that Treasurys have over CDs, said Samantha Mockford, associate wealth advisor in San Francisco. That's particularly relevant when interest rates are decreasing.

The interest a bank pays CD account holders is federally taxed as ordinary income and state taxes may apply depending on the state. Interest the federal government pays for Treasurys is subject to federal income tax, but exempt from state and local taxes.

When comparing CDs to Treasurys and other fixed-income products, Mockford looks at the taxable-equivalent yield. That's comparing the return from fixed income with no tax breaks to what's offered by tax-advantaged fixed income, like Treasurys and municipal bonds.

"CDs have not come out on top in that tax-equivalent yield comparison for a while, so we've been investing in more Treasurys and money-market funds for short-term fixed-income needs," she said.

Tax-equivalent yield calculators can help savers look under the hood of advertised CD rates to see what they're really getting. Mockford recently weighed a 3-month CD with a 4.067% APY against products including a 3-month Treasury bill, at 4.032% BX:TMUBMUSD03M.

The CD had the slight edge at first look, but then Mockford included the client's income and state to estimate the federal and state tax exposure. Running the numbers, she saw a 3-month CD would need to offer her client a 4.36% APY to get the same return of a 3-month Treasury bill at 4.032%.

"So today, the T-bill won for this client's short-term investment," Mockford said.

Looking beyond Treasurys

Nunn has eased his CD purchases, though 1- and 2-year CDs may still fit some clients' needs. Meanwhile, he started increasing his purchase of municipal bonds and corporate bonds.

Municipal bonds are generally exempted from federal taxes, as well as state taxes if the buyer is in the same state as the issuer. These yields currently average less than 4%, according to a Goldman Sachs note last week.

High-quality corporate bonds averaged an approximate 5% yield, according to Goldman Sachs $(GS)$ data. These yields are fully taxable.

Anyone looking for a stable return in these arenas can't rush in, Nunn emphasized. He only considers "stable companies and stable issuers." For corporate bonds, that's at least a single-A rating and above, he said. With muni bonds, it's an even higher grade of double-A, he said. He's also weighing the taxable-equivalent yield with these products because muni bonds tend to make the biggest difference for people in the highest tax brackets.

The three major rating firms, Moody's, Fitch Ratings and Standard & Poor's, give letter grades on the financial wherewithal of bond issuers. A-ratings and above go to the issuers considered a low default risk.

Similarly, Huey said savers need to understand the benefits and drawbacks if they are eyeing multi-year guaranteed annuities.

Like a CD, the money paid upfront is paid back with a fixed rate - except it's a contract with an insurance company and not a deposit with FDIC coverage. Huey has found contracts that run in 2- to 10-year spans. It's common to find offers with rates around 5% from well-rated insurers, he said.

But potential customers need to research the issuer's financial health and they need to understand the lock-up terms, he said. Generally, annuities have skeptics and supporters, given their complexity and cost. Huey said he isn't trying to settle the debate. He's only looking for a good yield on cash that can afford to be sidelined for a period of time. "I know annuities can be a dirty word, but in this case it can be a very nice tool," Huey said.

Doubling down quickly

There's nothing wrong with people making a rush to buy up CDs now to lock in competitive rates, Huey said. "The question is what do you do a year from now, when those CDs have matured?"

CD rates fell initially after the Fed's first rate cuts last fall, but have been largely stuck since then, according to S&P Global Market Intelligence. "Despite initial rate cuts post-September 2024, CD pricing has largely stabilized, reflecting intense deposit competition," said the analysis this month.

The Fed's meeting is soon, but CD Valet, an online platform to shop for the bank products, already has seen a decrease in advertised yields on CDs.

Some of the highest one-day rate decrease counts in recent months occurred in the first week of September, said Mary Grace Roske, head of marketing and communications for CD Valet. As of last Friday, yields on a six-month CD averaged 3.49%, while it was 2.83% for a one-year CD, she said. Some rates still surpass 4%, the site shows.

But it's not the end for CDs - far from it

Compact discs may be from a bygone era, but the certificate of deposit is not going away. CDs held almost $2.89 trillion in the second quarter, according to FDIC data. That's compared to $1.24 trillion in 2022's first quarter, when the Fed started hiking its benchmark rate from a near 0% starting point.

"Even with an additional Fed rate cut, yields on CDs and other short-term investments above 4% remain compelling for short-term money," said Rob Williams, managing director of financial planning at Charles Schwab $(SCHW)$.

A CD is a way to invest for the near term while getting FDIC protection, no matter the interest-rate environment, Williams said. A Fed cut to its short-term rate doesn't guarantee CD yields go lower, except for CDs with very short maturities, he added. Banks are competing for customers and aware of where else customers can look for strong yields, like the bond market, he said.

There's a wide range of CDs to choose from, though some rates are far stingier. Brick-and-mortar banks tend to offer lower deposit rates than online banks.

The average one-year CD rate is below 2% in FDIC measures that incorporate traditional bank CDs. At that rate, savers could do better with Treasury bills, said Tod Gordon, senior advisor with Klaros Advisors, a financial services consultant. But it's not the full story, he noted.

Online banks that haven't recently reduced their CD rates will likely use the Fed rate decision to spur their own rate reductions, Gordon said. The rate adjustments could be gradual in the first month after the Fed meeting and then steeper more than a month out. "Banks tend to watch each other's moves and gain confidence to reprice further (lower in this case) as others follow," he said.

-Andrew Keshner

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September 16, 2025 16:25 ET (20:25 GMT)

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