The headlines are ugly. of April Consumer Price Index (CPI) Report Prices were seen up 3.8% compared to last year – the worst reading since May 2023. april Producer Price Index (PPI) released Was still ugly. Producer prices rose 1.4% in a single month, the biggest jump since March 2022.
This is brutal news for anyone with a mortgage, car loan, or credit card balance.
But what no one on cable news is telling you: If you’re a saver, you’re winning right now. big time. And if you sit idle, you’re leaving real money on the table.
Savers should be celebrating while borrowers are crying. Here are five reasons.
1. Your savings account can finally pay you real money
According to the FDIC, the national average savings rate is a pitiful 0.38%. That’s what most Americans get because they stash cash in a big-name brick-and-mortar bank for years and never move it.
Meanwhile, online banks are paying around 4% APY (annual percentage yield) – sometimes more. This is more than 10 times the national average. On a $50,000 balance, the difference between 0.38% and 4% comes to about $1,810 per year. Savers at every income level are quietly making the switch, and so should you.
You can find a list of high paying savings accounts here.
If your bank statement shows a savings rate that starts at zero, change banks tonight.
2. CDs let you lock in today’s rates before the next Federal Reserve cut
If you think rates may fall again, you can lock in them with certificates of deposit or CDs. Their duration ranges from one to five years or more.
Five-year CDs are in the 4.15% to 4.18% range. Check out a CD comparison page here.
A CD locks in your yield for the entire term. If rates fall to 3% in 2027, your money will continue to earn 4%+ until the CD matures. This is the whole matter.
Trade-off: Your cash is locked up. Shake it too early and you’ll have to pay a fine. So use CDs only for money you won’t need before the term is up.
3. Treasury bonds are delivering their best yields in almost a year
10-year Treasury yields surge 4.49% in mid-May – The highest since mid-July last year. The 30-year Treasury bond rose above 5%. The two-year time frame is right around 4%.
Why should you care? Because you can buy Treasury bonds directly from Uncle Sam with no commission, no middleman, and zero risk of default. Just go to TreasuryDirect.gov.
Interest on Treasuries is also exempt from state and local income taxes. If you live in a high-tax state like California or New York, that incentive could be as much as half a percent or more on your effective yield.
Buy a 30-year bond at 5%, and you’ll get paid 5% for the next three decades. This is a real deal – especially if you think rates are going to eventually go down. However, keep in mind that if rates rise and you need to sell your existing 5% bond, its value will decrease.
That’s why it’s a good idea to create a ladder of CDs and bonds: some coming soon, some mid-range, and some long-term. This way, if rates rise, you’ll have some money coming in soon to take advantage of. If they fall off, you’ll have something locked out.
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4. I bonds are paying 4.26% – with a built-in inflation hedge
Worried inflation will silently eat your savings alive? Series I Savings Bonds Made exactly for this moment. They are issued by the US Treasury, and the rate adjusts every six months based on the CPI.
The current composite rate for I bonds purchased between May 1 and October 31 is 4.26%. This involves a 0.90% fixed share which you lock in for the entire 30-year life of the bond.
The inflation portion resets in November. If inflation keeps rising, your yield also rises with it. If inflation subsides, your rate drops, but it can never go below zero.
There’s one catch: You can’t buy more than $10,000 of I bonds per year per person, and you have to hold them for at least 12 months. Redeem before five years and you’ll forfeit the last three months’ interest.
Still, finding a safe inflation hedge is difficult, and we cover the rest of the nuances in “7 Things You Should Know Before Investing in I Bonds.”
5. Keep an eye out for serious spikes in your Social Security checks
The Social Security cost-of-living adjustment (COLA) is directly tied to inflation—specifically, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). And the CPI-W increased only 3.9% compared to the previous year.
Earlier this spring, analysts were projecting the 2027 COLA to be only 2.8%. Then oil prices soared due to the Iran conflict, gasoline climbed above $4.50 a gallon, and forecasts rose overnight.
Senior Citizens League Now 3.9% COLA projected for 2027. Independent analyst Mary Johnson puts the figure at 4.2%. That would increase the average retiree’s monthly check by about $80, about $960 a year.
Certainly higher grocery and fuel bills will swallow up a portion of that increase. And some ugly truths about how the COLA actually works mean retirees often see less of it than they expected. But the official COLA is still locked into your benefit base for life. And if you haven’t started accumulating yet, every dollar added today compounds over decades.
The final 2027 numbers will not be announced until October after the Social Security Administration looks at the average CPI-W readings for July, August and September. But the trajectory is clear, and it’s working in retirees’ favor.
big picture
When inflation rises, the Fed typically responds by keeping rates high for a longer period of time or by increasing them again. Right now, futures markets are predicting another Fed rate hike before the end of the year at about 30%.
This is terrible news for anyone with a variable rate loan or credit card balance. Average credit card rates are still well north of 20%.
But for a saver—someone who has cash in the bank, a CD ladder, or a Treasury portfolio—every increase in rates is a raise.
The financial press will continue to publish disastrous stories about inflation. Tune into some of this. Take your cash where it actually earns something. Buy a CD or two. Hold an I bond. And if retirement is near, remember: That COLA bump is real money.
Eventually inflation will calm down. The Fed will eventually cut. The window to lock in 4% or more will not always be open.
If you’re a saver, now is the time to take action.