By Jake FitzGerald

Copyright fool

CD rates look tempting right now. Plenty of banks are still offering 1-year CDs with APYs around 4.00%. For a lot of people, that’s a solid, safe way to put cash to work.

But I’m skipping CDs this month. Even with those attractive yields, they just don’t fit my plan; especially after the Federal Reserve met last week and cut rates. Here’s what I’m doing instead.

My short-term cash lives in a high-yield savings account

I keep my day-to-day savings in a high-yield savings account (HYSA). This is where I stash money for emergencies, travel, or anything else I might need on short notice.

Right now, I’m earning more than 4.00% APY without locking up a single dollar. Sure, a CD might pay a little more, but I’d rather trade a few bucks of extra interest for full flexibility.

Here’s why that matters: When the Fed cuts rates, banks usually slash HYSA yields almost immediately. CD rates often hang around a little longer. But even if HYSAs drop in the short run, I like being able to move fast if a better opportunity pops up.

I keep around $25,000 in my HYSA. At today’s rates, that’s close to $1,000 a year in interest for doing nothing. For me, that’s plenty.

If you’ve got cash sitting in a traditional savings account, step one is to move it somewhere that pays you properly. Many of the best HYSAs are still paying over 4.00% APY — check them out now.

My long-term money is invested for growth

When it comes to retirement savings, I’m leaning into stocks, not CDs.

My 401(k) contributions (plus an employer match, which I’ll take any day of the week) go into a total stock market index fund. Over the long haul, broad index funds have delivered around 10% average annual returns. I know past performance doesn’t guarantee future results, but I’ll happily take the growth potential.

And yes, stocks can be volatile. Sometimes my balance drops and my stomach drops with it. But that money’s locked up until I’m at least 59 1/2, so I can afford to ride out the swings.

IRAs and brokerage accounts round it out

Beyond my 401(k), my wife and I also max out our Roth IRAs and keep investing through a regular brokerage account.

In 2025, you can contribute up to $7,000 to an IRA ($8,000 if you’re 50 or older). It’s one of the simplest ways to save for retirement with powerful tax advantages.

A brokerage account doesn’t come with tax perks, but it offers unlimited investing potential and full flexibility. It’s a great complement to retirement accounts.

Why CDs don’t make sense for me right now

I could earn a touch more by opening a short-term CD today. But it wouldn’t move the needle in a meaningful way.

With the Fed potentially cutting rates again before the end of the year, there’s a good chance banks will keep dangling competitive CD offers a little while longer anyway. So for me, tying up cash now just isn’t worth it.

Instead, I’m keeping short-term money liquid in an HYSA and investing long-term money in index funds. That balance works best for my goals in 2025.

If you’re debating where your money belongs, the most important move is making sure your cash isn’t stuck in a low-yield account. Check out today’s best high-yield savings accounts and let your money actually work for you.