3 Places I'd Rather Put My Money Than a 5.00% APY CD

Many predict that certificate of deposit (CD) rates are going to fall off their peak of about 5.00% as we inch closer to 2025. Some see this as a sign that it's time to buy in. By opening a CD now, they can lock in high rates that could last months or even years.

There is some truth to this, but personally, I don't consider CDs a very appealing option. Here are three places I'd rather put my money.

1. High-yield savings account

A high-yield savings account is the best place for your emergency fund and savings you plan to spend within the next three to five years. Many of these have APYs close to what the top CDs offer right now, and they don't place any restrictions on when you can access your money like CDs do.

The tradeoff is that your rate isn't locked in like a CD rate. It's highly likely that savings account rates will begin to fall, either later in 2024 or as we move into 2025. This will take a toll -- possibly a substantial one -- on monthly interest payments. Back during the COVID-19 pandemic when the Federal Reserve slashed interest rates, high-yield savings account rates bottomed out at around 0.30%.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of January 9, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of January 9, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

Even with this risk, though, I still prefer to keep my money where it's easy to access. Earning a little bit of interest is nice, but it's not worth putting myself in a real bind if an emergency occurs and I suddenly need cash.

2. Retirement account

I prefer to keep my long-term savings in a retirement account. That way, it's invested so it can increase my buying power over time. The stock market has ups and downs, but it's possible to grow your wealth faster than the inflation rate when investing. That's something that even the best CD rates usually can't do.

Retirement accounts also provide valuable tax advantages. Tax-deferred accounts, like traditional IRAs and 401(k)s, give you an upfront tax break in the year you make a contribution, but you pay taxes on your withdrawals later. Roth IRAs require you to pay taxes upfront in exchange for tax-free withdrawals in retirement.

These benefits can add up to significant savings over the long term. But if you plan to use one of these accounts, stay mindful of its annual contribution limits. In 2024, you may only contribute up to $23,000 to a 401(k) and $7,000 to an IRA. Adults 50 and older may contribute up to $30,500 and $8,000, respectively. Exceeding these limits results in tax penalties.

3. Taxable brokerage account

I also keep some savings in a taxable brokerage account. These are investment accounts that don't get the special tax benefits of retirement accounts -- but they also have fewer rules. You can invest as much as you'd like and withdraw it whenever you want. Retirement accounts, on the other hand, have contribution limits and impose penalties on withdrawals made when you're under age 59 1/2.

A taxable brokerage account is a great place to keep savings you don't plan to use anytime soon but don't want tied up until retirement. Or if you plan to retire before age 59 1/2, you could rely upon these funds to carry you through until you're old enough to tap your retirement savings.

You could also use a combination of the above accounts. Think about which makes the most sense for you right now and then decide how much you hope to contribute to each account every month going forward. After you've had a few months to test out your plan, revisit it to see how things are going. Adjust as need be until you find a solution that works for you.