Your emergency fund should be enough so that you can sleep well at night. Here’s how to make sure the fund is easily accessible yet reaps a decent yield.
If you have retired from full-time work, or will soon, it’s important to have enough liquid assets to keep you from drawing down your portfolio in times of market turbulence.“It keeps you calm and steady in times of market volatility,” says Daniel Lee, director of financial planning and advice at BrightPlan, a financial wellness benefit provider based in San Jose, Calif. “The cash protects your investment portfolio from having to sell something at an unfavorable time.
“With an emergency fund the whole point is if you need money, it’s there,” says certified financial planner Andrew Feldman, who is based in the Chicago area. “If unforeseen things happen in your world, we’ve got some place to go. If you are on a fixed income, you don’t necessarily anticipate one-off items.”And you don’t necessarily want to spend down money from equities. If you are not yet 59-1/2, taking funds from retirement accounts can trigger a costly penalty.
The national average interest on a savings account is 0.06%, according to Bankrate. High-yield savings accounts vary in annual percentage yield , minimum amount required, and the way the interest is compounded but can have an APY of as high as 0.40%, 0.55%, even 0.65%. Check bankrate.com/ or depositaccounts.com/savings.
High-yield savings accounts typically provide flexibility yet each financial institution — whether a brick-and-mortar bank, an online bank or a credit union — offers different rates with its own terms.Most high-yield savings accounts are insured, either by the FDIC or National Credit Union Administration up to $250,000.
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