Need to Take an RMD This Year? Smart (and Safe) Places to Put the Money

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Stash Your RMD Cash in the Bank

If you have to take a required minimum distribution (RMD) from a retirement account this year but don’t need the funds right now, you have numerous excellent options for saving the cash. Not only can you easily earn at least 4.00%—and as much as a remarkable 5.50%—you can also do it virtually risk-free.

That’s because banks and credit unions are paying near-record rates on savings, money market, and certificate of deposit (CD) accounts, thanks to the Federal Reserve’s aggressive 2022–2023 rate-hike campaign. In addition, I bonds are paying reasonably attractive rates right now that will always keep you earning more than inflation.

It’s true that, lately, U.S. interest rates have been declining due to the Fed implementing a first rate reduction last month. And while it’s likely the central bank will further cut rates, the decreases are expected to be gradual, meaning the slide in savings and money market rates will probably also be slow.

But if you’re considering an option that locks in your future rate, you may want to move sooner rather than later. Though you aren’t obligated to take any 2024 required minimum distributions until Dec. 31, you could consider withdrawing now if you plan to move the money into a multi-year CD. Rates on CDs are expected to drift lower, so locking in sooner will likely score you a higher APY than you’ll be able to get in a couple of months. Similarly, I bond rates are higher for bonds purchased before the Treasury’s Oct. 31 deadline.

High-Yield Savings Accounts Keep Cash Accessible

One of the easiest ways to earn a great return on unneeded RMD funds is to dump them into one of the country’s best high-yield savings accounts. We rank the highest-paying options every business day, and the top rate is currently 5.50% APY. Not only that, but more than a dozen additional options are paying rates of 5.00% or better.

On the downside, savings account rates are variable meaning they offer no rate guarantee for the future. And with the Fed poised to make multiple rate cuts, it seems all but certain that savings account rates will be moving progressively lower for a while.

But for now, high-yield savings accounts are riding a wave. And many banks will simply lower their rates as gradually as the Fed makes its reductions.

Money Market Accounts Add Check-Writing

If you want to keep some of your RMD funds accessible for easy withdrawal and still have the option of writing paper checks, money market accounts are your answer. A money market account behaves just like a savings account but with the added feature of check-writing. Like some savings accounts, money market accounts may, however, limit how many withdrawals you can make in a month.

The best money market account rate is sometimes higher than the best high-yield savings account rate. Lately, however, it has more often gone the other way. For example, right now, the best money market rate is topping out at 5.00%. But if writing checks is a feature you value, then earning slightly less with a top money market account is still a great option.

A CD Guarantees Today’s High Rate Into the Future

For savers, one of the happiest byproducts of the Fed’s aggressive rate-hike campaign is that it pushed banks and credit unions to dramatically raise—and keep raising—the interest rates paid on certificates of deposit (CDs). As a result, shopping our daily ranking of the best nationwide CDs leads you to dozens of options to earn 5.00% or more in terms up to 14 months, or 4.00% or better in terms as long as five years.

If you won’t need your RMD funds for a long while, you’ll likely be better off with a long-term CD. Though the top rates for terms of three to five years currently range from 4.00% to 4.55%, your annual percentage yield (APY) will be guaranteed to last much longer. And because the Fed may cut rates steadily over the next two to three years, a long-term CD rate lock is smart right now if you’re able to commit the funds.

Whatever term you choose, today’s best CDs offer an excellent hedge against predicted Fed rate declines. When you open a CD, your rate is locked in until the CD’s term ends. So whether the Fed cuts interest rates one more time or 10, your CD rate will be guaranteed until it matures.

I Bonds Offer Inflation Protection for Up to 30 Years

I bonds get their name because they’re structured to pay a rate that tracks inflation. This makes them a surefire way to ensure your cash savings always out-earns what you’ll lose to inflationary price increases.

This is perhaps most true for long-term investors—such as those who are retired and want to keep some savings in a safe, predictable savings vehicle. I bonds can be kept for up to 30 years, with their interest rate adjusting every six months based on the most recent inflation trend.

Right now, new I bonds issued by Oct. 31 are paying 4.28% for their first six months, making them reasonably competitive. However, rates for I bonds will drop to an estimated rate of 3.20% after the first six months, or right away for any bond purchased Nov. 1 or later. So, if I bonds interest you for your RMD funds, consider making that move at least a few days before Oct. 31.

One thing to know with I bonds is that purchases are limited. A total of $10,000 in electronic I bonds can be purchased per person per year. In addition, those owed money back on their tax return can buy up to $5,000 more in paper I bonds using their refund. Some investors regularly buy $10,000 to $15,000 in I bonds every year, stockpiling them until they need the money—knowing that they’ll always be earning an inflation-beating return.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000. It also cannot specify a maximum deposit amount that’s below $5,000.

Banks must be available in at least 40 states to qualify as nationally available. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.