High Yield Money Market Accounts
In an investigation of high yield money market accounts, it was uncovered that money market accounts come as close to cash as possible and tend to be safer investment instruments than many other types of investments. These accounts are available through various sources including banks, credit unions, or even investment companies. The good thing is an investment company does not have to be involved. Liquid assets, which include short-term investment instruments like MMA's, are seen as cash in the financial world. In times of economic uncertainty, people prefer to maintain a decent level of liquidity. MMA's are perfect when a person has short term savings goals for an emergency fund set aside, future travel expenses, or an expected dental or medical expense. Money market accounts are relatively easy transactions. Exchanged for cash in a matter of minutes at a local bank, these instruments do not require the assistance of a broker to convert.
Some of these instruments are available at low yield and some at high yield. Traditionally, an investor who is willing to allow the bank to hold on to their funds for an extended period of time can earn a higher yield than the more short-term type. In any case, an MMA is considered a short-term investment; yet the yields are higher than say a savings account because there is a time period or maturity date attached to the account. Because high yield money market accounts are really the same as cash, they can be converted fairly quickly. This does not mean there is no penalty for instant conversion. The goal of MMA's is to provide "near-perfect liquidity. There are four basic account types that accomplish this goal: 1) U.S. Treasury Bills, 2) Bank Certificates of Deposit, 3) Commercial Paper, and 4) Banker's Acceptance. Each has its own rules and regulations. The one thing these instruments have in common is there are very similar to deposit checking and savings accounts in that the principal balance is not diminished like a stock or bond purchase might be. The initial deposit remains and any additional yield will be added at a later date. Although all high yield money market accounts have a similar goal, each takes a different road to get there.
U.S. Treasury Bills (also referred to as T-Bills) are backed by the government. Sold through a competitive bidding process at a discounted rate from the face value (or par value) in denominations of $1,000, a person can purchase a maximum of $5 million worth. An individual who purchases T-Bills is paid the face value at maturity. Usually after one month, three months or six months weeks the instrument can be cashed in for the face value. Because a T-Bill is a government issued instrument, there is little chance that the conversion process would ever have a glitch.
Next, there are Bank Certificates of Deposit. Most people refer to them as CD's. CD's are high yield money market accounts that are in the form of bank issued certificates that entitle a person to receive interest. Basically, its a promissory note that is insured by the FDIC. They are sold in denominations starting as low as $100 for individual purchasers and going beyond denominations of $100,000 for institutional investors. Although they are just as liquid as U. S. Treasury Bills, there is a penalty for converting them to cash before the maturity date. The purchaser of this instrument will be paid the interest along with the initial principal at the end of the term.
There are short-term unsecured debt instruments called Commercial Paper. In essence, they are high yield money market accounts issued by large corporations. They are used for the financing of accounts receivable, inventories and handling short-term liabilities; as an alternative to direct borrowing. A line of credit will often accompany Commercial Paper in case its needed to pay down the paper at maturity. Usually the maturity date is 270 days or less. Like the T-Bill, Commercial Paper is often issued at a discount rate. The prevailing market interest rates are the gauge for the rate. There is usually no collateral backing this note which makes it hard for small businesses and almost impossible for individuals to justify purchasing this type of instrument.
Lastly, there are Bankers' Acceptances. These high yield money market accounts start off as a bank order from a customer. They are short-term credit investments initialed by a non-financial entity, yet guaranteed by a bank for a certain specified amount of money to pay in the future. When the bank approves the order for payment as "accepted," the bank takes responsibility for making the payment to the purchaser. Acceptances are the same as other high yield money market accounts in that they are traded at a discount from face value, yet differ from the other MMA's listed because they are traded on the secondary market.
In general money market accounts are financial instruments that are fairly liquid. When looking for which type of account to invest in, one must keep in mind the following: 1) how much cash you can afford to "set aside" for the purpose of an investment, 2) whether or not the penalty for early conversion is worth the risk, and 3) how quickly the account can be converted to cash. "And so he that had received five talents came and brought other five talents, saying , Lord, thou deliveredst unto me five talents: behold, I have gained beside them five talents more." (Matthew 25:20) Rather than having money just sitting in a regular savings or checking account, it makes sense to have the money work to earn more money. Opening high yield money market accounts is a favorite option for low-risk, fixed income investing. The dividends that are paid from these accounts are safe; making them an easy choice.
Highest Roth IRA CD RatesHighest Roth IRA CD rates are competitive and help individuals save for a secure financial future. They are not tax-deductible and include stipulations for contributions based upon adjusted gross income but they do provide tax-free growth potential and contributions can be withdrawn at any time after five years with no penalties. Contributions in a Roth do not reduce taxable income but interest, dividends, and gains are tax free. Some sources recommend that individuals who do not have an employer that provides a 401k plan to open up a Roth IRA account as soon as possible. IRA interest rates will depend upon the investment choices that an individual chooses. Some of the choices may include stocks, bonds, mutual funds, money market funds, certificates of deposit, and other options.
A traditional retirement account does not have the benefits that an investor will have with a Roth account. Withdrawals from a traditional account will result in paying taxes and penalties if funds are withdrawn before the age of 59 and a half. IRA interest rates in a Roth will allow contributions to grow without the worry of having to pay taxes on that growth. Traditional retirement accounts allow a person to save but the individual investor is not the only one who reaps the benefits. Once that money is withdrawn then taxes are due on the total amount withdrawn so the government benefits as well. Tax rules can change in the future so a person would do well to take advantage of the benefits that are currently experienced by contributing to a Roth retirement account.
An investment company offers investors opportunities to take advantage of the highest Roth IRA CD rates. These companies have relationships with banks and credit unions that offer the best rates. The government insures certificates of deposit up to thousands of dollars. An individual should place their investment with banks and credit unions that are insured by the government. Using an investment company or financial services company can make the process much easier but there will be fees incurred for using their services. Investment companies can be found on the Internet. Many of them post current certificate of deposit rates on their website. In addition, there may be other valuable information that can help a person understand more about Roth individual retirement accounts and certificates of deposits, among other things.
Young people do not normally think of investing for their future simply because they are young and think they have plenty of time to start saving. Those who have employers that offer investment opportunities are very fortunate. There are some habits that are worthy of developing and saving is one of those. An investment retirement account or a 401k usually has many types of saving options. IRA interest rates may include a fixed guaranteed rate but choosing stock options will cause the interest to vary. Some sources suggest choosing a variety of options to increase profits and minimize losses. A person can be overwhelmed when trying to make decisions about the future. Planning for the future is a good thing but sometimes it can cause a person to fret and worry about what could happen or might happen. Trusting in the Lord for guidance and deliverance from stress is possible when taken one day at a time. "From the end of the earth will I cry unto thee, when my heart is overwhelmed: lead me to the rock that is higher than I" (Psalm 61:2).
Certificates of deposit are considered low-risk in the world of investing. They carry federal deposit insurance and over time earn a predetermined amount of interest. Certificates of deposit can be purchased through banks, brokerage firms, and independent financial service companies. The highest Roth IRA CD rates are generally long-term investments that are ideal for retirement accounts. An individual needs to confirm the maturity dates for certificates of deposit. A maturity date determines when an investor will be able to cash it in. People who choose to invest in certificates of deposit should get the maturity date information in writing so their money will not be tied up longer than desired. A person can cash a CD in before the maturity date but will have to pay a penalty for doing so.
Confirmation for any type of investment made should be in writing. Whether the investment is with an invested retirement account or in stocks or bonds, there are a few things that need written confirmation. One is the maturity dates associated with the highest Roth IRA CD rates or with any certificates of deposits. Another important reason for confirmation is with the interest rate and whether it is fixed or variable and how will the investor be informed if there are variables to those rates. A person who chooses to save for retirement needs to remain as informed as possible in any and all types of investments.
Financial advice will help a person to make vital decisions on how to save for retirement. IRA interest rates should be of prime importance in choosing the right plan. Many sources recommend that an individual take advantage of several different types of options. An individual retirement account will generally contain many different choices for consideration. Some of these choices include options that are a higher risk for earning profits and some are fixed amounts that are guaranteed. When making a final decision on options a person would do well to ask lots of questions and get as much information in writing as possible.