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Online Savings & Money Market Account Rates 2020

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Medical Savings Account or Health Savings Account?

Rate information contained on this page may have changed. Please find latest savings rates.

A comparison of two popular tax-favored savings plans to help you determine which is best for you.

If you have some IRS refund money burning a hole in your pocket, you might want to check out the many other tax-free or tax-deferred ways to save.

Medical Savings Accounts

They might be called flexible spending accounts, or FSAs, but whatever the name, these workplace benefit plans can help you save on medical and child care costs.

With a medical spending account, you can put aside money to pay for health care costs that are not covered by your insurance.
Advantages: Employee money goes into the account before payroll taxes are figured, so your withholding taxes will be slightly less. FSA money pays for out-of-pocket medical expenses (co-pays, deductibles) you would have to pay anyway. You can use your FSA money even before you've actually put money into the account. For example, let's say you sign up to contribute $1,000 to your medical FSA, but have deposited only $100 when you are faced with a $300 out-of-pocket expense. You still can collect the $300 from your account. Also, you can use FSA money to pay for over-the-counter medications.
Drawbacks: Companies limit the amount you can put into your medical FSA. Under the recently enacted health care reform act, beginning in 2013 the maximum that can be contributed to an FSA will be $2,500. Unused FSA money does not roll over into the next benefit year, although some companies allow account holders a grace period that runs through March 15 of the following year to use the funds.


Health Savings Accounts

Money placed in a health savings account also pays medical costs, but these medical savings vehicles are different from FSAs.

In order to open an HSA, you must be covered by a high-deductible health insurance policy, which means you paid medical costs of at least $1,150 for self-only coverage or $2,300 if you had family coverage in 2009. For 2010, the deductible limits are $1,200 and $2,400. Once you have the requisite insurance coverage, you can open an HSA and contribute up to the amount of your insurance policy's deductible. Individuals age 55 and older can make additional catch-up contributions to the HSA each year until they enroll in Medicare.
Advantages: You get an immediate deduction on your Form 1040 for contributions to an HSA. You do not have to itemize to claim this deduction. Even if someone else, for example, a relative, makes the contributions to your HSA, you still get the tax deduction. HSA earnings grow tax-free. As long as HSA funds pay for eligible medical expenses, you owe no tax on the distribution. Any money in the account at year end can be carried forward to the next year.
Drawbacks: You have to pay a high deductible for medical care, meaning you'll have to come up with the doctor and pharmacy payments and then be reimbursed from your HSA, rather than having your bills go directly to the insurer for payment as with traditional health policies. If you get a high-deductible policy during the year instead of at the beginning, the amount you can contribute to an HSA is prorated by the number of months you've had the policy.

Top CD Rate Drops to 3.31% APY - Savings and CD Averages Down

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Savings and CD rates continued to drop last week, although the decline in average savings rates slowed to a crawl. Some of the top CD rates dropped though, effectively lowering the best rates available.

Savings and CD rates continued to drop last week, although the decline in average savings rates slowed to a crawl. Some of the top CD rates dropped though, effectively lowering the best rates available.

Savings Rates

Average savings rates dropped by only 1 basis point last week from 1.37% APY to 1.36% APY. The top rates also remained the same with Southern Community Bank's Ready Saver 2% APY Savings Account leading the pack of non-promo rates. For promotional rates, Everbank remains on top with their 3-month introductory bonus rate of 2.25% APY. After the three-month period, the rate drops down to 1.26% APY for a blended one year APY of 1.51% APY. Banks that dropped their rates include:

  • Franklin Synergy Bank falling from 1.7% APY to 1.65% APY.
  • Palladian Private Bank falling from 1.55% APY to 1.5% APY
  • Savings Square from 1.35% APY to 1.25% APY

CD Rates

The average 1-year CD dropped from 1.63% APY to 1.61% APY. First City Bank continued to hold the top spot with a 1.80% APY CD.. First City Bank is in bad financial shape and has been operating under a FDIC Cease and Desist Order since 10/09. Southern Commerce Bank which last week had the second highest rates dropped its 12-month CD to 1.50% APY, moving Tennessee Commerce Bank into the second spot at 1.70% APY.

The average 3-year CD rate had the biggest drop last week, falling from 2.52% APY to 2.47% APY. The top rate also dropped from 2.75% APY to 2.65% APY. Bank United which held the top rate dropped its CD to 2.50% APY. The top spot is now occupied by USAA Federal Savings Bank, which requires a minimum deposit of $175,000. The next highest rate is Acacia Federal Savings at 2.65% APY and a $500 minimum deposit.

The average 5-year CD dropped from 3.19% APY to 3.16% APY.

The top two rates on the 5-year CD fell with USAA lowering its rate from 3.41% APY to 3.31% APY. It's still the highest rate even though it's 10 basis points lower than last week. Everbank continues to have the second highest rate at 3.30% APY versus the 3.39% APY it was offering last week.. One thing to note about Everbank is their penalty for breaking a CD early. According to their terms:

"This penalty will be equal to one-fourth of the total interest that would have been earned on the principal balance of the account if funds had not been withdrawn prior to the maturity date."  On a 5-year, 60 month CD, that's 15 months of interest.

The spread between average savings rates and 3-year CD rates dropped again for the sixth week in a row. To me, that constitutes a trend. Savings rates have slowed their descent while 3-year CDs have been plummeting lately. Thus, the spread has been narrowing. This is not consistent with an economy that expects to see inflation and interest rates increases anytime soon. The other spread we follow is between the 1-year CD and 5-year CD. It has remained relatively flat, dropping from 1.56 to 1.55 after hitting a record high last week of 1.56. Shorter term CDs continue to fall while longer maturity CDs have held up. It also seems that we are close to a bottom in savings and money market account rates.

Annuities: Why You Shouldn't Take The Big Payout

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The annuity, an often overlooked investment product, is enjoying a revival. But just because you're promised big payouts doesn't mean you should jump at the opportunity.

I was definitely surprised to hear about the comeback of annuities, so when I started taking a harder look at them, I found definite possibilities for investors to consider, along with some serious dangers.

Annuities, in case you don't know, are basically incomes that you purchase from insurance companies.  You hand over a big wad of cash in the beginning, and the insurance company pays you a fixed stable amount for the rest of your life.

For instance, the company Presidential Life offers a lifelong immediate annuity that costs you three hundred grand up front, but will pay out just under two grand a month for the rest of your life.  That means, in about fifteen years or so, you'll start making a profit on the annuity while getting a regular consistent income that isn't affected by interest rate fluctuations like CDs and bonds.

But there's a risk--that same company, Presidential Life, has a rating from AM Best, a consulting firm that rates insurance companies, of a B+.  This may not SOUND bad, but considering that the top rating is A++, a B+ suddenly looks like an F.  Especially if it's YOUR three hundred grand you just dropped with them.

See, some lower-rated companies will often offer higher payouts in a bid to get their hands on more capital to invest and of course pay their own bills with.  They've been described as the equivalent of junk bonds, which also offer higher payouts due to enhanced risk.  But with a little bit of searching and some careful planning, an annuity may be just the thing to protect your savings long term.