Finance

Where to move your money when interest rates are poised to fall

Published

1 year ago

September 13, 2024

Where to move your money when interest rates are poised to fall

With the Fed poised to cut interest rates next week, the ripple effect will show up in certificates of deposit and high-yield savings accounts, which currently offer rates of more than 5%.

They aren’t likely to fall dramatically following a rate cut but rather ease back closer to 4% and linger above the inflation rate for at least the next year. So these accounts should still be your go-to for your emergency fund or cash set aside for short-term expenses.

That said, the Fed’s anticipated action offers an opportunity to make some money moves that take advantage of the downward tilt in interest rates.

“The projected cutting may pull the rug from under the high-yield savings rates,” Preston D. Cherry, founder and president of Concurrent Financial Planning, told Yahoo Finance. “Now might be the best time we’ve seen in a few years to swap cash in high-yield savings for long-term bonds to lock in a higher yield for income payments for lifestyle and retirement portfolios.”

Since 2022, when the Fed began to raise short-term interest rates, bank savings accounts have been a better place to park your cash than bonds. That’s set to change.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

Bonds are back

It’s a good time to shift to bonds for those nearing retirement who are looking to rebalance their retirement savings amid stock market volatility.

The best way to earn a high total return from a bond or bond fund is to buy it when interest rates are high but about to come down, Cherry said.

If you buy bonds toward the end of a period when rates are rising, you can lock in high coupon yields and enjoy the increase in the market value of your bond once rates start to come down.

And if you’re a bond lover, you’re up. After more than a decade of dismal bond yields, the two-fold impact of high rates right now and falling inflation offers an opportunity for investment income. When interest rates move lower, bond prices will rise. (Interest rates and bond prices move in opposite directions.)

“Adding low-price and higher-yield long-term bonds at current levels could add total return diversification value to your bond and overall investment portfolio, which has not been the case in recent past rate-raising environments,” Cherry said.

This is a narrow opportunity, though, before rates start dipping and bond prices go up.

“If you have adequate liquidity and won’t need to tap the money at a moment’s notice, then locking in bond yields now over a multiyear period can provide a more predictable income stream,” Greg McBride, chief financial analyst at Bankrate.com, told Yahoo Finance.

“As the Fed starts cutting interest rates, short-term yields will fall faster than long-term yields in the months ahead, so do this for the income rather than the expectation of capital gains,” he said.

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Home finances — Fidelity offers over 100,000 bonds, including US Treasury, corporate, and municipal bonds. Most have mid- to high-quality credit ratings, but to me the sheer number of choices is mind-boggling. (Getty Images) (damircudic via Getty Images)

Laddering provides a ‘more predictable income stream‘

One way savers can pivot as rates head down is to set up a bond or CD ladder with staggered maturities, instead of investing all your funds in a single CD or bond with one set term length. This tactic can provide “a more predictable income stream while providing regular access to principal,” McBride said.

I hold my personal savings, for example, in several buckets, including six-month and one-year CDs, a money market account, high-yield savings accounts, and a checking account.

The bulk of my retirement holding is stocks and bonds mainly through broad index funds. How you divide up your savings and investments between stock and bonds, mutual funds and money market funds, or high-yield savings accounts is a balance that only you will know you’re comfortable with, based on your risk tolerance and how soon you need to tap the funds.

Many retirees want a more conservative asset mix as they age so they don’t face that uneasy feeling when the stock market is shaky. That’s why near-retirees and retirees, in particular, who haven’t taken a gander at their asset allocations for a while should consider doing so.

Read more: CDs vs. bonds: What’s the difference, and which one is right for me?

How to put money in bonds for right now and retirement

Most 401(k) investors are in bond mutual funds for the fixed-income portion of their portfolios, which are highly diversified and usually invested in intermediate (five-year) high-quality government and corporate bonds.

Most of us aren’t researching and investing, for instance, in individual intermediate bonds. If you opt to do-it-yourself and choose individual bonds and hold them until they mature, you’ve got plenty to select from, of course. Fidelity offers over 100,000 bonds, including US Treasury, corporate, and municipal bonds. Most have mid- to high-quality credit ratings, but to me the sheer number of choices is mind-boggling.

So I buy shares in a wide range of individual bonds via a bond mutual fund or ETF to add a bond ballast to my retirement accounts. The Vanguard Total Bond Market ETF, for example, is a diversified, one-stop shop comprising more than 11,000 “investment grade” bonds — including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities — all with maturities of more than one year.

Right now, more than 60% of the Vanguard fund’s total assets are in government bonds, and its year-to-date return is 4.94%.

As Vanguard notes, this fund “may be more appropriate for medium- or long-term goals where you’re looking for a reliable income stream and is appropriate for diversifying the risks of stocks in a portfolio.”

For shorter-term goals, staying ahead of rates falling is smart to lock in alluring rates for money you might need sooner rather than later.

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Cash has ‘zero risk’ of losing nominal value

The majority of financial advisers I spoke to didn’t suggest any knee-jerk actions ahead of the Fed meeting. In other words, don’t close your bank accounts.

“Inflation has certainly moderated, but in our opinion is not likely to be a further decline substantially,” said Peter J. Klein, chief investment officer and founder of ALINE Wealth.

If that’s the case, the Fed will not keep lowering interest rates but will hold them steady moving forward.

“Looking at the long arc of inflation history, one can see the changes … leading to sticky and persistent inflationary pressures. So, the notion that rates will come down substantially — and stay down — is not our base case,” Klein said.

That means that those savings you have in a federally insured, accessible bank account earning above the rate of inflation remain a good bet. That’s especially the case for those nearing or in near retirement who plan to tap that money for living expenses and don’t want the worry that comes from price fluctuations in stocks and bonds.

“Cash is the only asset that an investor can deploy in a portfolio that has zero risk of losing its nominal value,” Klein added.

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.

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Finance

Military Troops and Retirees: Here’s the First Financial Step to Take in 2026

Published

4 hours ago

January 9, 2026

Press Room

Military Troops and Retirees: Here’s the First Financial Step to Take in 2026

Editor’s note: This is the fourth installment of New Year, New You, a weeklong look at your financial health headed into 2026.

You get your W-2 in January and realize you either owe thousands in taxes or get a massive refund. Both mean your withholding was wrong all year.

Most service members set their tax withholding once during in-processing and never look at it again. Life changes. You get married, have kids, buy a house or pick up a second job. Your tax situation changes, but your withholding stays the same.

Adjusting your withholding takes five minutes and can save you from owing the IRS or giving the government an interest-free loan all year.

Use the IRS Tax Withholding Estimator First

Before changing anything, run your numbers through the IRS Tax Withholding Estimator at www.irs.gov/individuals/tax-withholding-estimator. The calculator asks about your filing status, income, current withholding, deductions and credits. It tells you whether you need to adjust.

The calculator considers multiple jobs, spouse income and other factors that affect your tax bill. Running it takes about 10 minutes and prevents you from withholding too much or too little.

Read More: The Cost of Skipping Sick Call: How Active-Duty Service Members Can Protect Future VA Claims

Changing Withholding in myPay (Most Services)

Army, Navy, Air Force, Space Force and Marine Corps members use myPay at mypay.dfas.mil. Log in and click Federal Withholding. Click the yellow pencil icon to edit.

The page lets you enter information about multiple jobs, change dependents, add additional income, make deductions or withhold extra tax. You can see when the changes take effect on the blue bar at the top of the page.

Changes typically show up on your next pay statement. If you make changes early in the month, they might appear on your mid-month paycheck. If you make them later, expect them on the end-of-month check.

State tax withholding works differently. DFAS can only withhold for states with signed agreements. Changes require submitting DD Form 2866 through myPay or by mail. Not all states allow DFAS to withhold state tax.

Changing Withholding in Direct Access (Coast Guard)

Coast Guard members use Direct Access at hcm.direct-access.uscg.mil. The system processes changes the same way as myPay. Log in, navigate to tax withholding and update your information.

Coast Guard members can also submit written requests using IRS Form W-4. Mail completed forms to the Pay and Personnel Center in Topeka, Kansas, or submit them through your Personnel and Administration office.

Read More: Here’s Why January Is the Best Time to File Your VA Disability Claim

When to Adjust Withholding

Check your withholding when major life events happen. Marriage or divorce changes your filing status. Having kids adds dependents. Buying a house affects deductions. A spouse starting or stopping work changes household income.

Military-specific events matter, too. Deploying to a combat zone makes some pay tax-free. PCS moves change state tax situations. Separation from service means losing military income but potentially gaining civilian income.

Check at the start of each year, even if your circumstances seemingly stayed the same. Tax laws change. Brackets adjust for inflation. Your situation might be different even if it seems the same.

The Balance

Withholding too little means owing taxes in April plus potential penalties. Withholding too much means getting a refund but losing access to that money all year.

Some people like big refunds and treat it like forced savings. Others would rather have the money in each paycheck to pay bills, invest or set aside in normal savings.

Neither approach is wrong. What matters is that your withholding matches your tax situation and your preference for how you receive your money.

Run the estimator. Adjust your withholding. Check it annually. This simple process prevents tax surprises.

Previously In This series:

Part 1: 2026 Guide to Pay and Allowances for Military Service Members, Veterans and Retirees

Part 2: Understanding All the Deductions on Your 2026 Military Leave and Earnings Statements

Part 3: Should You Let the Military Set Aside Allotments from Your Pay?

Part 4: This Is the Best Thing to Do With Your 2026 Military Pay Raise

Stay on Top of Your Veteran Benefits

Military benefits are always changing. Keep up with everything from pay to health care by subscribing to Military.com, and get access to up-to-date pay charts and more with all latest benefits delivered straight to your inbox.

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Finance

The case against saving when building a business

Published

16 hours ago

January 8, 2026

Press Room

The case against saving when building a business

Listen and subscribe to The Big Idea with Elizabeth Gore on Apple Podcasts, Spotify, or wherever you find your favorite podcast.Would you rather play it safe, or grow your business? This expert breaks down why investing is everything.This week on The Big Idea with Elizabeth Gore, Howard Enterprise founder and the Wall Street Trapper Leon Howard joins the show to answer the question: How can I use a Wall Street mindset for my business? Howard offers expert insight on why it is absolutely critical that founders take risks and invest capital, versus just saving.To learn more, click here. Yahoo Finance’s The Big Idea with Elizabeth Gore takes you on a journey with America’s entrepreneurs as they navigate the world of small business. This post was written by Lauren Pokedoff

Finance

This Is the Best Thing to Do With Your 2026 Military Pay Raise

Published

1 day ago

January 8, 2026

Press Room

This Is the Best Thing to Do With Your 2026 Military Pay Raise

Editor’s note: This is the fourth installment of New Year, New You, a weeklong look at your financial health headed into 2026.

The military’s regularly occurring pay raises provide an opportunity that many civilians only dream of. Not only do the annual percentage increases troops receive each January provide frequent chances to rebalance financial priorities — savings vs. current standard of living — so do time-in-service increases for every two years of military service, not to mention promotions.

Two experts in military pay and personal finance — a retired admiral and a retired general, each at the head of their respective military mutual aid associations — advised taking a similarly predictable approach to managing each new raise:

Cut it in half.

In one variation of the strategy, a service member simply adds to their savings: whatever it is they prioritize. In the other, consistent increases in retirement contributions soon add up to a desirable threshold.

Rainy Day Fund

The active military’s 3.8% pay raise in 2026 came in a percentage point higher than retirees and disabled veterans received, meaning troops “should be able to afford the market basket of goods that the average American is afforded,” said Michael Meese, a retired Army brigadier general and president of Armed Forces Mutual.

While the veterans’ lower rate relies exclusively on the rate of inflation, Congress has the option to offer more; and in doing so is making up for recent years when the pay raise didn’t keep up with unusually high inflation, Meese said.

“So this is helping us catch up a little bit.”

He also speculated that the government shutdown “upset a lot of people” and that widespread support of the 3.8% raise across party lines and in both houses of Congress showed “that it has confidence in the military and wants to take care of the military and restore government credibility with service men and women,” Meese said.

His suggestion for managing pay raises:

“If you’ve been living already without the pay raise and now you see this pay raise, if you can,” Meese advised, “I always said … you should save half and spend half,” Meese said. “That way, you don’t instantly increase your spending habits just because you see more money at the end of the month.”

A service member who makes only $1,000 every two weeks, for example, gets another $38 every two weeks starting this month. Put $19 into savings, and you can put the other $19 toward “beer and pizza or whatever you’re going to do,” Meese said.

“That way you’re putting money away for a rainy day,” he said — to help prepare for a vacation, for example, “so you’re not putting those on a credit card.” If you set aside only $25 more per pay period, “at the end of the year, you’ve got an extra $300 in there, and that may be great for Christmas vacation or Christmas presents or something like that.”

Retirement Strategy

Brian Luther, retired rear admiral and the president and chief executive officer of Navy Mutual, recognizes that “personal finance is personal” — in other words, “every situation is different.” Nevertheless, he insists that “everyone should have a plan” that includes:

What your cash flow is
Where your money is going
Where you need to go in the future

But even if you don’t know a lot of those details, Luther said, the most important thing:

Luther also advised an approach based on cutting the 3.8% pay raise in half, keeping half for expenses and putting the other half into the Thrift Savings Plan. Then “that pay will work for you until you need it in retirement,” Luther said. With every subsequent increase, put half into the TSP until you’re setting aside a full 15% of your pay.

For a relatively young service member, “Once you hit 15%, and [with] the 5% match from the government, that’s enough for your future,” Luther said.

Previously in this series:

Part 1: 2026 Guide to Pay and Allowances for Military Service Members, Veterans and Retirees

Part 2: Understanding All the Deductions on Your 2026 Military Leave and Earnings Statements

Part 3: Should You Let the Military Set Aside Allotments from Your Pay?

Get the Latest Financial Tips

Whether you’re trying to balance your budget, build up your credit, select a good life insurance program or are gearing up for a home purchase, Military.com has you covered. Subscribe to Military.com and get the latest military benefit updates and tips delivered straight to your inbox.

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