Episode 294 – The Cash Pivot: What to Do as Yields Melt Away

The easy 5% returns on cash may be disappearing — but that doesn’t mean your money has to stop working hard.

In this episode of The Agent of Wealth Podcast, host Marc Bautis breaks down one of the biggest shifts happening in personal finance right now: the decline of high-yield cash account rates. After two years of earning 5%+ in savings accounts and money markets, many investors are wondering where to move their cash next.

In this episode, you will learn:

• Why high-yield savings accounts and money market funds are no longer paying what they did just a year ago.
• The differences between money market funds, CDs, Treasuries, I Bonds, municipal bonds, annuities, and dividend-paying stocks.
• How to evaluate cash investments using the four pillars: risk, liquidity, rate, and taxes.
• Tax-efficient strategies that can help high-income investors potentially keep more of their returns.
• And more!

Tune in for an in-depth discussion on how to reposition cash in a falling-rate environment, the importance of matching investments to your time horizon, and why the highest yield isn’t always the best after-tax outcome for your financial plan.

Resources:

Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call

Disclosure: The transcript below has been edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.

Welcome back to The Agent of Wealth. This is your host Marc Bautis, and today we’re tackling a topic I’ve been getting a lot of questions about lately: what to do with cash investments.

For the past two years, cash was king. You could park money in a high-yield savings account or money market fund and earn 5% with virtually no effort. People actually started checking their bank statements again just to see how much interest they earned each month. It almost felt like free money.

But lately, you’ve probably noticed those interest payments getting smaller.

If it feels like the party is ending, you’re not entirely wrong — but the opportunity hasn’t disappeared. It’s just moved.

Today, we’re going to discuss why rates are falling and, more importantly, where you can reposition your cash to keep your money working efficiently without taking unnecessary risk.

Why Cash Rates Are Falling

Let’s set the stage.

From 2022 through 2023, the Federal Reserve raised interest rates aggressively to combat inflation. We went from near-zero rates to over 5% in a relatively short period of time.

But as we moved through late 2024 and into 2025, inflation began cooling and the Fed shifted toward measured rate cuts. As of May 2026, the Federal Funds Rate has settled into the mid-3% range.

When the Fed cuts rates, the first place you feel it is in floating-rate accounts — things like high-yield savings accounts and money markets. Those yields adjust almost immediately.

Longer-term rates, like the 10-Year Treasury, haven’t fallen as quickly. That’s created what’s known as a steepening yield curve.

In plain English: the easy 5% on your savings app is gone. To earn higher returns now, investors need to think more strategically about risk, liquidity, and taxes.

So let’s walk through the major options.

1. High-Yield Savings Accounts & Money Market Funds

These remain the go-to option for emergency savings and short-term cash needs because they offer strong liquidity and relatively low risk.

But it’s important to understand that these rates are variable. As interest rates fall, these are usually the first products to see lower yields.

Now, there’s often confusion around money market funds, so let’s quickly clarify what they are.

A money market fund is a type of mutual fund that invests in highly liquid, short-term debt securities. Think of it as a “mutual fund for cash.”

The goal is to maintain a stable $1 share price while paying investors interest in the form of monthly dividends.

These funds typically invest in:

• Treasury Bills
• Certificates of Deposit
• Commercial Paper
• Repurchase Agreements, also known as repos

There are also different types of money market funds:

• Government or Treasury funds
• Prime funds
• Tax-exempt municipal money market funds

Treasury money market funds tend to be the safest because they invest in government-backed securities. Prime funds may offer slightly higher yields but take on a bit more credit risk.

From a tax perspective, municipal money market funds can be attractive for high-income investors because the interest may be federally tax-free.

One important point: money market funds are not FDIC insured like bank accounts. However, they invest in extremely short-term, high-quality debt securities, which is why they’re generally considered very low risk.

Liquidity is also strong. In most cases, you can access your money within one business day.

2. Certificates of Deposit (CDs)

CDs become attractive when investors believe rates may continue falling.

Why? Because a CD allows you to lock in today’s rate for a set period of time.

The trade-off is liquidity. If you need the money before maturity, you’ll typically pay an early withdrawal penalty.

For money you know you’ll need in the next 12 to 24 months, CDs can still play a useful role.

3. U.S. Treasuries

Treasuries are another strong option for conservative investors.

In many cases, Treasuries are currently yielding as much — or even slightly more — than comparable CDs.

But the real advantage is tax treatment.

Interest earned on U.S. Treasuries is exempt from state and local income taxes. So if you live in a high-tax state like New Jersey, New York, or California, a Treasury yielding 4% may actually provide a better after-tax return than a CD yielding 4.2%.

4. Series I Savings Bonds (I Bonds)

Another option worth discussing is the Series I Savings Bond — or I Bond.

These became extremely popular during the high-inflation environment of 2022 when rates briefly exceeded 9%.

While rates have normalized, I Bonds can still serve an important role for long-term “patient cash.”

Think of an I Bond as a government-backed savings vehicle designed to keep pace with inflation.

The rate has two components:

• A fixed rate that stays with the bond for its life
• An inflation-adjusted rate that resets every six months

As of May 2026, the fixed rate is 0.90%, and the current composite rate is approximately 4.26%.

There are a few important rules:

• You cannot redeem the bond during the first 12 months.
• If you cash out before five years, you forfeit the last three months of interest.

From a tax standpoint, I Bonds offer several advantages:

• No state or local income taxes
• Federal taxes can be deferred until redemption
• Potential tax-free treatment if used for qualified education expenses, subject to income limitations

5. Fixed Annuities / MYGAs

Fixed annuities, often called MYGAs — Multi-Year Guaranteed Annuities — are essentially “insurance company CDs.”

They typically offer:

• Guaranteed interest rates
• Tax-deferred growth
• Higher yields than many traditional bank products

The trade-off is liquidity.

Unlike a savings account or money market fund, annuities usually come with surrender charges if you withdraw money early.

In terms of safety, annuities are backed by the claims-paying ability of the insurance company. They are not federally insured, but each state has a guaranty association system that provides protection up to certain limits.

For larger annuity allocations, spreading assets across multiple insurance carriers may help maximize protection limits.

Transition to Moderate Risk Investments

Everything we’ve discussed so far falls into the “lower-risk cash management” category.

Now let’s shift into investments that carry more price fluctuation but may offer higher long-term income potential.

6. Municipal Bonds

Municipal bonds — or munis — are loans made to states, cities, and municipalities.

Their biggest appeal is tax efficiency.

Interest earned on municipal bonds is typically exempt from federal income tax, and in some cases state taxes as well.

For investors in higher tax brackets, the tax-equivalent yield on a muni bond can actually exceed many taxable investments.

When evaluating municipal bonds — and corporate bonds, which we’ll discuss next — credit quality matters.

Remember: when you buy a bond, you are the lender.

Higher-quality issuers typically pay lower interest rates because the perceived risk is lower. Lower-quality issuers must offer higher yields to compensate investors for taking on additional risk.

Credit Ratings Explanation

This is where credit ratings become important.

The major rating agencies — S&P, Moody’s, and Fitch — classify bonds into two primary categories:

Investment Grade:

• Higher confidence in repayment
• Historically low default rates

High Yield, sometimes called “junk bonds”:

• Higher yields
• Greater credit risk and price volatility

If a company or municipality experiences financial trouble after you purchase the bond, the bond’s market value may decline. That’s known as credit spread risk.

7. Corporate Bonds

Corporate bonds work similarly, except now you’re lending money to companies instead of governments.

Investment-grade corporate bonds generally offer higher yields than Treasuries because investors require additional compensation for taking on corporate credit risk.

One thing investors need to understand is that bond prices fluctuate.

If you sell before maturity, your principal value may be higher or lower depending on:

• Interest rates
• Credit conditions
• Market demand

8. Dividend-Paying Stocks 

Finally, we move from lending to owning.

Dividend-paying stocks provide investors with:

• Potential income through dividends
• Potential long-term appreciation

Unlike bonds or CDs, these investments can experience significant price volatility. However, as interest rates decline, dividend-paying stocks can become more attractive to income-focused investors.

This is not necessarily an apples-to-apples comparison with cash investments, but for investors with a longer time horizon, dividend strategies may deserve consideration.

If you’re sitting entirely in cash today, you’re likely watching your income decline every time the Fed cuts rates.

That doesn’t mean you should take unnecessary risk — but it does mean you should be intentional.

A few general guidelines:

• Keep emergency reserves highly liquid.
• Consider locking in intermediate-term cash with CDs or Treasuries.
• Evaluate tax-efficient options if you’re in a higher income bracket.
• Match your investments to your time horizon and risk tolerance.

At the end of the day, the goal isn’t simply to chase the highest yield. It’s to find the best after-tax return for the right amount of risk and liquidity.

Thanks for listening to The Agent of Wealth. If you want a custom ‘Cash Audit’ to see which of these options fits your plan, reach out to our team.

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Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.