5% sounds great. But what you earn – and when you can access your money – matters even more

Remember when savings accounts paid you basically nothing? When “playing it safe” meant watching your money lose ground to inflation?

That era is over.

On September 30, the yield on the 10-year U.S. Treasury touched 5.304%, its highest level since 2002. A week later, the Treasury sold $39 billion of new 10-year notes at 5.300%, the highest auction yield in more than 25 years.

That’s good news for savers, and especially for retirees and people nearing retirement. But only if your money is in the right place.

1. Put your idle cash to work

Most retirees and pre-retirees keep a healthy cash cushion: an emergency fund, a year or two of spending money, or savings set aside for a big purchase. That’s smart. But if that cash is sitting in a regular checking or savings account, there’s a good chance it’s earning a fraction of a percent.

Meanwhile, inflation ran at 3.7% over the past year. Cash earning next to nothing is quietly losing buying power every month.

Two simple places to look instead:

• A high-yield money market account at a bank or credit union
• A brokerage account holding a high-yield money market mutual fund. Many of these funds are yielding close to 4% right now.

The difference adds up fast. Moving $100,000 from 0.5% to 4% means about $3,500 more a year in income, without taking on stock market risk. (Hypothetical example; actual rates vary and change often.)

One note: money market mutual funds are not FDIC-insured, and their yields change as rates change. They’re designed to be stable and low-risk, but they work differently from a bank account.

2. About that 5.3%: read the fine print

Headlines about 5% Treasuries are exciting, but there’s a catch most articles skip.

You only lock in that 5.3% if you buy the bond and hold it until it matures, 10 years from now. In the meantime, the bond’s market value can rise and fall as rates move. If you need to sell early, you could get back more or less than you paid.

For retirees, that matters. Money you may need for living expenses, healthcare or travel in the next few years probably doesn’t belong in a 10-year bond. A money market fund keeps that cash flexible while still earning a competitive yield.

3. The flip side: borrowing got expensive

Higher rates cut both ways. The average 30-year mortgage hit 7.3% at the end of September, its highest since November 2023.

If you’re thinking about downsizing, buying a second home or helping a child buy their first one, run the numbers at today’s rates, not the rates you remember.

4. What comes next? Nobody knows for sure

Experts disagree. J.P. Morgan Asset Management’s Karen Ward says the 10-year is “unlikely to rise much above 5%.” ING says yields could reach 6%.

The next clue comes soon: the Federal Reserve meets October 27–28, after raising rates in September.

The smart move isn’t betting on a forecast. It’s making sure your plan works either way.

The bottom line

You don’t need to take on more risk to earn more on your savings right now. You just need to make sure your cash is in the right place.

Three questions to ask this week:

• Where is my cash sitting, and what is it earning?
• Do I own anything long-term that I might need to sell in the next few years?
• Is my retirement income plan built for today’s rates?

We can help. Wurz Financial Services can get you optimized with the right financial connections

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