Top Insights for Managing Savings of Over $100K
If you’ve recently come into a large sum of money and are thinking about depositing more than $100,000 into your savings account, there are a few things you should know.
When you deposit over $100,000 into your savings account, your bank will likely need to report this to the IRS. This doesn’t mean you can’t make the deposit or that something bad will happen, but large deposits can raise suspicions of criminal activity, so they have to be reported.
With this in mind, it’s important to handle your finances carefully. Here are some key points to consider when making such a large deposit:
**Understand FDIC Insurance Limits**
First, it’s crucial to understand FDIC insurance limits. Individual accounts are insured up to $250,000, so if you’re depositing more than $100,000 but less than $250,000, your money is protected. However, if you’re depositing more than $250,000, you should think about spreading your money across different banks or using joint accounts, which insure each owner’s share up to $250,000. If your savings exceed this limit, the extra amount won’t be covered if the bank fails.
**Interest Rates**
Savings accounts usually offer lower interest rates compared to other investments. For large balances, this might mean minimal growth. Consider higher-yield options like high-interest savings accounts or certificates of deposit for better returns. Sometimes, higher deposits can help you negotiate better interest rates, especially in high-yield savings accounts. Always talk to your bank about what options or special rates might be available based on the size of your deposit. Keep an eye on interest rate changes, as banks often adjust them, which could affect your returns.
**Liquidity vs. Return**
Think about your need for liquidity versus returns. Savings accounts provide easy access to your money, but investing in higher-return assets like stocks or bonds could increase your wealth, depending on your risk tolerance and financial goals.
**Consider Hiring an Expert**
Large sums in savings accounts might require additional considerations for estate planning or investments. Consulting a certified financial analyst can provide tailored advice to maximize the efficiency of your large savings balances, ensuring your money works effectively according to your personal financial goals.
**Prioritize Tax Implications**
The interest earned from a large sum could potentially move you into a higher tax bracket, so planning is crucial. Any deposit over $10,000 is reported to the IRS, and the interest earned will be too. While the Inflation Reduction Act targets earners over $400,000 a year, it’s important to develop good tax strategies. Consulting with a financial advisor can help you navigate these complexities and make the most of your savings.