73° Good Evening
73° Good Evening

Saving strategies in a low-interest time

With a little bit of work, there are

With a little bit of work, there are some ways to improve the return on your cash. Photo Credit: iStock

As expected, when the Federal Reserve concluded its most recent two-day policy meeting, the central bankers decided to keep short-term interest rates at zero to one-quarter of a percent, which is where they have been since December 2008. In fact, it has been almost nine years (June 2006) since the Fed last increased interest rates.

While this has been great for borrowers, beleaguered savers have faced rates below 1 percent on everything from savings accounts to money market funds to two-year Treasury notes. The current environment is a far cry from 2006, when 3.5 to 4 percent was common for one-, three- and five-year certificates of deposit, commonly referred to as CDs.

Increasingly, these folks are wondering when they will see some relief. The answer may be later this year, but it's going to be some time before they enjoy juicy pre-recession rates. That said, with a little bit of work, there are some ways to improve the return on your cash. is a great resource to compare rates at banks and credit unions.

One way to squeeze extra money out of a CD is to purchase a longer-term instrument with minimal 60-day early withdrawal penalties. Additionally, with rates remaining so low for so long, brokerage firms have become more competitive in the CD market.

As investment adviser Allan Roth noted: "A key difference between these CDs and the ones you buy from banks is that brokered CDs trade like bonds if you need to sell before maturity. If interest rates in the marketplace have fallen, you may receive a higher price than you paid for the CD. But if interest rates rise, you are likely to receive less than you paid."

Another idea for earning a little extra on your cash is to use Series I U.S. Savings Bonds. I-bonds have two components: a fixed rate, which remains the same throughout the life of the bond, and a variable rate that is adjusted twice a year (May and November) based on changes in the inflation rate, as measured by the Consumer Price Index.

I-bonds earn interest for up to 30 years. You can cash them in after one year, but if you cash them in before five years, you lose the last three months of interest. (For example, if you cash in an I-bond after 18 months, you get the first 15 months of interest.)

But here's the problem with I-bonds right now: The inflation rate is actually negative due to plunging energy prices. So when the Treasury Department adjusted the composite rate for I-bonds issued from May 1, 2015, through Nov. 30, 2015, the first fixed rate was zero percent and the inflation rate was negative 0.8 percent. The folks at Treasury are kind enough to round up to zero percent when the calculation produces a negative number. So, with I-bonds paying zero, it's awfully hard to get excited about them.

For those seeking to find higher interest rates for funds other than emergency reserve funds, the choices get murkier. If you really hate market gyrations and you participate in a retirement vehicle that offers a guaranteed income contract, you may be in luck. Many large plans offer guaranteed options, like those from TIAA-CREF, which are currently earning 1 to 3 percent, depending on your plan.

If you are a risk-averse investor who only has money market options or is already retired, consider adding short- and intermediate-term corporate bond funds to your retirement accounts or short- and intermediate-term municipal bonds for taxable accounts. Of course, these asset classes are riskier than the plain vanilla alternatives, but if you are willing to live with the inevitable gyrations, you just may be able to goose the income of your portfolio and also sleep at night. Otherwise, you could be waiting a long time until cash is king again.

Jill Schlesinger is editor-at-large for She welcomes emailed comments and questions.


We're revamping our Comments section. Learn more and share your input.

More Lifestyle