You may want to check your brokerage money market account. When the markets became turbulent, my parents, like many folks decided to move to cash and parked it in their brokers money market account. My parents use Fidelity, and when I checked, I found it was only yielding 1.37%. When you subtract the management fee of 0.43% it was yielding less than 1%.

For many brokerage money market funds, short term treasuries make up a sizable portion of the investments. Since the Federal Reserve lowered rates to near zero these types of money market funds are now yielding very low rates. In fact treasury-only money markets funds who only invest in short term treasuries are at risk of yielding a negative rate once you subtract expenses and fees.

I spoke to my parents about their money market account and asked them about their short term investment objectives. Though they plan to put some money back into the markets the majority of it they plan to keep in cash for the next 12 months. This presented them with an opportunity to earn a significantly higher yield on their money by putting it in a one year CD with a bank like ING Direct which is currently offering 2.5% on one year CDs. Their cash would also be protected by FDIC insurance.

My parents have their money in a 401k so in order to buy CDs they will need to open up an IRA account with ING and transfer the money directly from Fidelity to ING. If you are considering a similar move it is important you discuss it with your accountant or tax professional first because if you handle the transfer from a tax advantaged account such as a 401k incorrectly you can be hit with additional taxes and penalties.

I encourage all readers who have a meaningful amount of cash sitting in a brokerage money market account to find out what rate your are earning and to think about alternatives if you don’t plan to use that cash in the next 6-12 months.