Have you ever thought about how expensive your checking account is? Wait, what?! Yes, your checking account is costing you thousands of dollars. Is that a bad thing? It could be, or it may not matter. Let’s dive into why your account is expensive and what you can do about it.
The Federal Reserve dropped interest rates to ZERO on March 15th, 2020. That has had a direct correlation to where interest rates on checking and savings accounts, money markets, CD’s and different bond funds. It has forced people to look at different options whether that is stock, mutual funds, cryptocurrency, annuities, real estate, etc. But what does that mean for the money in the checking account? That money needs to be SAFE! That money also needs to be LIQUID for emergencies and every day expenses. How much should you keep in there? The rule of thumb is that you should have 6-12 months of your monthly expenses liquid at all times. Some people have more, some people have less. Let’s dive into how much that checking account is costing you though.
The best checking account rate right now based on a google search is .03%. If you had $100,000 in that account, you would earn $300 on the year. Then after you pay 17% tax (depending on federal and state tax of course), you would net $249. If you had that same account in a 3 year fixed annuity, you could make $1,750 of interest AND get tax deferral. If you had it in a 5 year fixed annuity, you would make $2,250 of interest each year AND get tax deferral. What is the end result?
The checking account after 3 years = $100,523
The 3 year fixed annuity after 3 years = $105,342
The 5 year fixed annuity after 5 years = $111,767
Your checking account is costing you thousands of dollars!
What if you put that same $100,000 into a Lump Sum Long Term Care policy? You and your spouse may have a $3 to $4 THOUSAND dollar PER MONTH benefit UNLIMITED LIFETIME as long as you all may need care.
What if you put that same $100,000 into a Lump Sum Life Insurance policy? You would generate $150,000 - $350,000 at your death TAX FREE to your family!
Your checking account has a major cost. It’s not fees, but it is a major opportunity cost. At a time when interest rates are low, volatility and inflation are high, and options are limited, it may be time to move some money and be more efficient.
Checking accounts are great for LIQUIDITY, which everyone needs, but they may be a lot more expensive then you think!
Call Berry Financial at 843-808-9850 or click HERE if you would like to learn more about how to make your checking account work harder for you.