Stash That Cash (Anywhere But Your Mattress)

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Have you heard the story about the contractor renovating a bathroom and finding more than $180,000 stashed in the walls?1 In times of economic uncertainty, people often rush to pull their money out of the market and convert it into cash. This is where we get the phrase “mattress money” — cash that’s been stashed somewhere other than a bank. While this might seem like a good idea in the short term when the markets are low, it can have costly consequences.

What happens when your wallet gets stolen? Credit and bank cards can be canceled and replaced, but any cash you might have had is gone for good. The same is true for money stashed in your mattress, in a wall, under the floorboards or buried in a tin can in the tomato garden. If your home is broken into or damaged in a fire or other natural disaster, that cash is likely not protected by renters or homeowners insurance. It’s just gone. Your money is almost always safest in a federally insured institution. Here your money is typically protected for up to $250,000 per person. Moreover, even when interest rates are low, you still earn dividends when you keep your money in a savings account.

A pile of cash just hiding somewhere in the house isn’t doing anything for you (except possibly attracting trouble). Aside from turning your mattress into a glorified piggy bank, what should you do when the market is too volatile for your risk tolerance? The first thing to do is not to panic. Making hasty, emotion-driven decisions will likely hurt you more than the market in the long run. It’s almost always a good idea to consult a financial professional before making significant adjustments to your portfolio. You especially want to be aware of any potential tax consequences associated with moving money around. Finally, know that you have options. Depending on your income needs and risk tolerance, there are ways to build up your savings without relying so heavily on the stock market.

” Making hasty, emotion-driven decisions will likely hurt you more than the market in the long run. “

For instance, you might decide you want to move a portion of money into less risky investments such as a fixed index annuity (FIA). Designed to meet long-term needs for retirement income, an FIA is essentially a contract between you and an insurance company offering various guaranteed payout options.

In exchange for paying a premium, you receive certain fixed interest crediting options that compound tax deferred until you begin making withdrawals.

Another alternative you might consider is a multi-year guaranteed annuity (MYGA). A MYGA is the annuity version of a certificate of deposit (CD). For the duration of the annuity contract, you are contractually guaranteed a set return. They’re generally shorter contracts than FIAs (though not always), and, like an FIA, you don’t lose any money if the market goes down.

Which is better, an FIA or MYGA? It all depends on your goals. If you’re looking for a short-term investment, an MYGA is likely better. If a long-term investment with a future income stream is needed, an FIA is preferable. Whether accumulating a few extra dollars with a high-interest savings account or money market account or switching from stocks to bonds, the most important thing to remember is to choose a vehicle that puts your money to work for you in ways that physical cash can’t.

1 OnFocus. June 3, 2020. “Why You Shouldn’t Hide Your Money in Your Mattress.” Accessed Sept. 30, 2022.

2 Stan Haithcock. March 28, 2022. “Annuity Comparison FIA vs. MYGA.” Accessed Sept. 30, 2022.

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