Your Interest Stinks? Savers Have Options

Dear Dr. Don, I am retired. I have savings of approximately $80,000 in a money market account at a very conservative local bank.??I have two lines of credit at a different bank at 18%. I want to pay them off to save on the interest expense. I also want to pay off a credit card. I will be left with about $65,000, which needs to go somewhere other than my conservative money market account. My $80,000 earns about $155 a year in interest in that account. I am 83 years old and not much of a risk taker at this time in my life. What would you do? Thanks. --Norma Nominal

Dear Norma, Paying down your lines of credit and credit cards makes perfect sense. It looks like you're earning 0.19% on the $80,000 sitting in the money market account. Using some of the money to pay off lines of credit at 18% and a credit card that's likely to also be at a double-digit interest rate is smart. You'll have the added bonus of freeing up the money in your monthly budget that was going toward making those loan payments.

What to do with the $65,000 still in savings? Well, you don't want all of it sitting in a money market account. I'd suggest that you place part of the money in certificates of deposit insured by the Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund (for credit unions). You can use Bankrate to find CDs with high yields in your market.

Savers have to find the right combination of safety, liquidity, yield and convenience when finding a home for their savings. Right now you have too much liquidity, and your interest earnings are suffering because of it. While we currently are in a low-yield environment for savings, you can still improve on what you're earning in the money market account by putting some of your savings into CDs.

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