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Online Savings & Money Market Account Rates 2020

Online Savings & Money Market Account Rates

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SmartyPig Getting Ready to Buck Trend and Raise Savings Rate to 2.15% APY

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SmartyPig is getting ready to buck the trend of declining savings rates by announcing that it is raising its rate to 2.15% from 2.01% APY. As part of that increase though, it's creating a tiered rate system. Only the first $50,000 will receive the higher rate.

SmartyPig is getting ready to buck the trend of declining savings rates by announcing that it is raising its rate to 2.15% from 2.01% APY. As part of that increase though, it's creating a tiered rate system. Only the first $50,000 will receive the higher rate. The tiered system works like this:

*Effective May 19, 2010:

  • Interest rate earned on balances $1 - $50,000 will earn 2.133% (2.15% APY)
  • Interest rate earned on balances above $50,000 will earn 0.499% (0.50% APY)

So, if you plan on investing more than $50,000 SmartyPig is not the place. The 2.15% APY though is one of the top savings and money market rates according to the BestCashCow rate tables.

Here's what SmartyPig's CEO had to say in the press release announcing the rate increase:

"With credit card issuers expected to raise interest rates to 16 or 17 percent by the fall(3), we believe it is important now, more than ever, that consumers adopt responsible financial habits," said Bob Weinschenk, chief executive officer, SmartyPig. "Which is why we firmly believe in rewarding customers who want to save and spend smartly, and give them the opportunity to get ahead again and stay there."

Several Things to Know About SmartyPig

SmartyPig is not a typical savings account. The site works by creating goals that you can save for: a vacaction, college tution, a new television, etc. Then, when you are ready to withdraw the money, you can do so in one of three ways:

  • You may put all of your savings plus interest on the flexible SmartyPig MasterCard® debit card
  • Have it sent back to your bank
  • Receive up to a 12% cash boost on your savings by placing it on a retail card like, Best Buy, Travelocity or Macy’s

So, if you're saving for a television or cloths at Macy's, the savings get an extra boost. If you just want to use it like a regular savings account, you can have the money sent back to your main bank when you are ready to widthdraw funds.

The second thing to know is that SmartyPig does not actually keep your money. They are not a bank. Instead, your funds are held by West Bank, an FDIC insured bank. There has been some debate on various sites about whether those individual accounts are FDIC insured. In the past I have spoken with West Bank about this issue and they assured me that each individual account was insured up to the maximum allowed by the FDIC.

Roth IRA or Roth 401(k)?

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The Roth 401(k) is becoming an increasingly popular option in employee savings plans. This article helps you determine the benefits and drawbacks of this plan, in comparison to the Roth IRA.

The introduction of the Roth 401(k) added an excellent new retirement savings strategy for workers.  It also added more confusion to the already-difficult retirement planning conundrum.  So which is better: the Roth 401(k) or the Roth IRA?

Roth IRA contributions were first accepted in 1998.  That year, $8.6 billion went into these retirement plans, with another $39 billion transferred from traditional IRAs to Roth IRAs.  By 2001, IRS data showed that contributions to Roth IRAs had surpassed the amount going into traditional IRAs.  Why the shift?

Money earned in a Roth IRA can be taken out in retirement tax-free.  Contribution limits for Roth IRAs are generally the same as with traditional IRAs, with one major difference: as long as you keep earning money, you can contribute to a Roth, regardless of your age.  In contract, the traditional IRA requires minimim withdraws at the age of 70 1/2. 

Roth IRA Plan

Advantages:  The earnings are tax-free.  This is very appealing to young account holders who open a Roth early and let the money grow for decades, as well as individuals who expect to be in the same or possibly higher tax bracket when they retire.  You can contribute at any age and can take money out on your timetable, not the IRS's age 70 1/2 withdrawal schedule required of Traditional IRAs.

Disadvantages: Contributions are not tax deductible.  There is an earnings limit which restricts higher-income taxpayers from contributing or converting traditional IRA money to a Roth IRA.  

Roth 401(k) Plan

These accounts combine the basics of 401(k)s with the tax-free aspect of Roth IRAs.  Essentially, workers put money into Roth 401(k)s after payroll taxes are withheld, meaning the account doesn't offer an immediate tax benefit.  But when the money is withdrawn, it is tax-free.

Advantages: Distributions are tax-free.  Contributions, as with regular 401(k)s, are higher than for IRAs.  Employer matching contributions increase your retirement savings.  There are no adjusted gross income caps, so higher-income workers who may not be able to open a Roth IRA can contribute to a Roth 401(k).  Also, you can leave the money in the account past age 70 1/2.

Disadvantages: These are not yet as available as regular 401(k) plans.  Because money goes into this account after taxes are withheld, you get no immediate tax break.

Whether your 401(k) is a regular or Roth account, ultimate responsibility for your workplace retirement savings rests entirely on you.  You generally must enroll in the account and then manage it, deciding which 401(k) offering best fits your personal financial situation. 




Medical Savings Account or Health Savings Account?

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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.