As the world economy has suffered multiple set backs within past few years, lots of employers are forced to either reduce the amount of money they match in 401k plans or totally discontinue 401k matching to stay afloat and profitable. As this practice became increasingly more popular among organizations, individuals began looking for alternative techniques of saving for their retirement. Although many people chose to put their future retirement savings in normal savings accounts, a huge majority of people selected a different, safer, and more effective route- a money market account .
A money market account is in essence a savings account that usually offers a much higher interest rate than that of a conventional savings account. Banks are able to offer higher interests on these types of accounts for various reasons. One reason is because of the intended use of the deposited money itself. Banks use the money in money market accounts to invest in government and corporate securities & subsequently pays the depositor based on the current interest rates within the money market. Moreover, limitations are applied to the accounts which require that a bigger amount of money remain deposited in them than in traditional savings accounts. Banks are also permitted to charge fees if the account has funds withdrawn from it exceeding the permitted amount of times in a given period of time. Although there're more restrictions on a money market account than a conventional savings account, the exponentially higher interest rates it attracts more than enough make up for the limitations.
Another reasons why money market accounts are becoming increasingly popular is because of their relative security in relation to 401k plans that hinge mostly on the success of an individual's employer usually as the funds in the 401k plan are consisted of stock within a given company. Also, unlike a 401k plan, the money in a money market account are insured by the FDIC like a conventional account so there's no risk of completely losing it if a bank closes. Additionally, the penalties for withdrawing money from a money market account are normally less severe than that of a 401k plan and allow a fixed number of withdrawals a month.
When utilizing a money market account, among the most useful tools an investor can use is that of a money market calculator. Someone can analyze their money market account and its respective characteristics like the initial and current deposited amount, the current interest rate, length of expected account duration, annual percentage yield, compounding interest, and so on and employ a money market calculator to estimate the estimated value of the account over a given time period. Utilizing a money market calculator will permit you to effectively manage your account along with plan for the future based on the estimated funds available at a future date.
Numerous online websites offer free money market calculators for individuals to utilize and these easy tools can successfully assist you plan your future and manage, track, and estimate your expected savings targets.
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