3-6 months of essential expenses if you're working dual-income, 6-12 months if single-income, 9-12 months if self-employed, and 12-24 months of expenses if retired (the cash bucket). Anything above your target is over-allocated to cash and is bleeding purchasing power to inflation. The excess should move to CDs, T-bills, or MYGAs depending on your time horizon.
Savings account vs MYGA, after tax
Rates used: Savings account 4.00%, the top online savings rate we tracked (bank sites, September 24, 2026); savings rates can change any day; change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| Savings account, interest taxed every year | $116,604 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the savings account, after tax | $9,531 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. Bank and credit union deposits are FDIC or NCUA insured up to the limits; a MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
The right HYSA balance depends on your income stability, not your net worth. Working households: 3-12 months of essential expenses depending on income reliability. Retirees: 12-24 months as a cash bucket against sequence-of-returns risk. Business owners or self-employed: 9-12 months plus business reserves.
Anything held in HYSA above the appropriate target is over-allocated cash. Over-allocated cash bleeds 2-4% per year to inflation drag (real yield = nominal yield minus CPI). It's safe, but it's not earning what it should.
The two failure modes are symmetric:
The math says: hold the minimum cash that lets you sleep through any reasonable surprise, and put everything else to higher-yielding work.
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| Profile | Target HYSA balance | Why |
|---|---|---|
| Dual-income W-2, stable jobs | 3 months expenses | Low simultaneous-loss risk |
| Single-income W-2 | 6 months | Single point of failure on income |
| Commissioned sales / variable income | 9 months | Pay swings normalize over longer windows |
| Self-employed / 1099 | 9-12 months | Client concentration + irregular cash flow |
| Business owner | 9-12 months personal + 3-6 months business reserves | Two separate buffers |
| Pre-retiree (1-3 years out) | 12 months | Bridge to retirement income |
| Retired | 12-24 months | Cash bucket avoids selling portfolio in down years |
| Retired with pension + SS covering all expenses | 3-6 months | Reduced sequence risk |
A 62-year-old married couple, both retired, with $35,000/month in essential expenses. Pension + SS = $14,000/month, leaving $21,000/month to fund from portfolio. Target cash bucket: 18 months of the portfolio draw = $378,000 in HYSA.
Their actual cash: $620,000. Surplus: $242,000.
Allocation of the surplus to fixed-rate vehicles:
By moving the surplus, the couple keeps the same liquidity buffer but adds ~$12,800/year of guaranteed credited interest, locked for 3-5 years. If HYSA rates drop to 3.50% during that period, the protected income is roughly $4,500/year above what they'd have earned leaving everything in HYSA.
Once the HYSA target is funded, every additional cash dollar should be evaluated by time horizon:
I'm Hans Goldstein, an independent licensed insurance producer (NPN 20602398), appointed with multiple A-rated carriers. I don't sell HYSAs (banks do), but I run the math against CDs and MYGAs every week for retirees and pre-retirees. Tell me how much cash you're parking and how soon you need it. I'll send back a one-page comparison.
Rather talk it through? Or book 15 minutes on Hans’s calendar, or call 213-414-2808.
Hans Goldstein · 213-414-2808 · NPN 20602398 · independent, appointed with multiple A-rated carriers
This article is general educational information, not personalized financial, tax, or legal advice. HYSA APYs, CD rates, and MYGA rates change frequently. Confirm current figures with the bank or carrier and the actual contract or account agreement before acting. FDIC insurance covers deposits at member banks up to $250,000 per depositor, per insured bank, per ownership category. State insurance guaranty associations cover annuity contracts up to state-specific limits (typically $250,000-$300,000). Hans Goldstein is an independent licensed insurance producer (NPN 20602398). No compensation has been received from any bank or carrier in connection with this article. Past rates do not predict future rates. Tax discussion reflects federal law as of 2026 and is subject to change; consult a CPA for your specific situation.
Hans Goldstein · Retirement & income planning
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