On Wednesday, the Federal Reserve held its latest policy meeting and, as expected, kept interest rates unchanged. This comes despite President Trump’s continued pressure on the Fed to begin cutting rates.
While the Fed has stayed the course for now, the market is still pricing in potential rate cuts later this year—possibly as soon as September. For savers, that warrants a shift.
Over the past couple of years, many clients have enjoyed earning attractive returns on their cash through high-yield savings vehicles, like Flourish Cash, which has been a go-to solution for our clients. But as rates begin to decline, yields on these accounts will follow suit almost immediately after the announcement. Based on current projections, the 4% APR from Flourish cash will likely drop to 2.5-3.0% by the end of 2026.
With the high-yield cash party potentially winding down, here are five compelling alternatives to consider if you’re looking to preserve yield, enhance tax efficiency, or reposition excess cash:
1. BOXX ETF – Tax-Efficient Cash Yield
If you’re seeking a smarter way to earn interest without the drag of ordinary income taxes, Alpha Architect 1-3 Month Box (BOXX) offers an innovative solution. It converts short-term fixed income returns into long-term capital gains—potentially reducing your tax liability. For those in higher tax brackets, this can be a significant upgrade from traditional interest-bearing accounts.
Bottom line: Better tax efficiency, especially if you’re already paying top-dollar on your investment income.
2. Fixed Income ETFs – Yield with Rate Cut Upside
Broad bond market funds like iShares Core U.S. Aggregate Bond ETF (AGG) are currently yielding around 4.4%. While bonds aren’t risk-free, they may offer not only income, but capital appreciation if the Fed does in fact begin cutting rates. As interest rates fall, the value of existing bonds generally rises.
Important caveat: Duration and interest rate sensitivity can cause short-term volatility, so this is best used as part of a diversified strategy—not a straight cash substitute.
3. Multi-Year Guaranteed Annuities (MYGAs) – Stability + Deferral
For those who value principal protection with higher yields, MYGAs are worth a close look. These fixed annuities offer guaranteed rates, currently in the 5.0% to 5.5% range for 5-year terms. They do offer terms as short as two years and as long as ten years depending on your time horizon. One added benefit with MYGAs? Earnings grow tax-deferred, which means you don’t pay taxes on the gains until you withdraw. This is a nice advantage for investors using non-tax advantaged funds (brokerage accounts, bank money, etc.) who would typically pay taxes on all interest paid as it’s earned in the money market account.
Translation: A stable, predictable option for a portion of your cash, especially in retirement-focused portfolios.
4. Fixed Indexed Annuities (FIAs) – Growth With Protection
If you're looking for a little more upside without exposing your principal to market losses, Fixed Indexed Annuities may fit the bill. A standout in the current environment is Security Benefit’s TopRidge, which currently offers a 21% bonus and growth potential tied to indexes like the S&P 500. Again, with annuities, earnings grow tax-deferred, which means you don’t pay taxes on the gains until you withdraw.
Who it’s for: Long-term investors who want stock market-linked growth, but with insurance-based guarantees on principal.
5. The Stock Market – Long-Term Growth Potential
Last but certainly not least—if you’re sitting on too much cash and have a long time horizon, investing in the market remains the most powerful long-term strategy for beating inflation and building wealth. Yes, it comes with volatility and risk. But it also offers unmatched return potential over time.
Our view: This is a full shift in risk profile from cash, but for those who are over-allocated to low-yield vehicles, it may be time to re-evaluate.
Final Takeaway
For the past couple of years, we’ve been spoiled with unusually high yields on cash—returns that required little to no risk. But that era appears to be coming to a close. As interest rates gradually come down, high-yield savings accounts and cash-alternatives like Flourish will likely offer far less value.
The five strategies above each offer unique benefits—some prioritizing safety and tax deferral, others offering more upside with calculated risk. If you’re unsure where to move next, we’re here to help evaluate what fits best for your goals, risk tolerance, and timeline.
Now is the time to be proactive. Don’t wait until your cash stops working for you.
Disclosures
This material has been prepared for informational purposes only and should not be construed as a solicitation to effect, or attempt to effect, either transactions in securities or the rendering of personalized investment advice. This material is not intended to provide, and should not be relied on for tax, legal, investment, accounting, or other financial advice. You should consult your own tax, legal, financial, and accounting advisors before engaging in any transaction. Asset allocation and diversification do not guarantee a profit or protect against a loss. All references to potential future developments or outcomes are strictly the views and opinions of Richard W. Paul & Associates and in no way promise, guarantee, or seek to predict with any certainty what may or may not occur in various economies and investment markets. Past performance is not necessarily indicative of future performance.