What Happens to Your HYSA Rate When the Fed Cuts (or Raises) Rates? 2026
Written & reviewed by Hans Goldstein, EA, independent licensed insurance producer · CA license 4273294 · NPN 20602398Admitted to practice before the IRS
Fed data and savings rates checked September 24, 2026 · Updated
When the Fed cuts, high-yield savings rates usually follow it down, on the bank's schedule, not the Fed's. Savings rates are variable and not contractually tied to the federal funds rate. The most recent move was the other direction: On September 16, 2026 the Federal Reserve raised its federal funds target range by 0.25 point to 3.75% to 4.00% (effective September 17), after 1.75 points of cuts between September 2024 and December 2025.
Savings account vs MYGA, after tax
What $100,000 earns in 5 years: 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.
Where rates stand
| Rate | Level | As of |
|---|---|---|
| Federal funds target range | 3.75%-4.00% | Effective Sept 17, 2026 |
| Effective federal funds rate | 3.88% | Sept 23, 2026 |
| Sallie Mae High-Yield Savings | 3.85% APY | Sept 24, 2026 |
| Marcus Online Savings | 3.50% APY | Sept 24, 2026 |
| Synchrony High Yield Savings | 3.30% APY | Sept 24, 2026 |
| Capital One 360 Performance Savings | 3.10% APY | Sept 24, 2026 |
| Ally Savings | 3.00% APY | Sept 24, 2026 |
| FDIC national average, savings | 0.37% APY | Sept 21, 2026 |
The recent Fed path
| Change effective | Move | Target range after |
|---|---|---|
| Sept 19, 2024 | -0.50 | 4.75%-5.00% |
| Nov 8, 2024 | -0.25 | 4.50%-4.75% |
| Dec 19, 2024 | -0.25 | 4.25%-4.50% |
| Sept 18, 2025 | -0.25 | 4.00%-4.25% |
| Oct 30, 2025 | -0.25 | 3.75%-4.00% |
| Dec 11, 2025 | -0.25 | 3.50%-3.75% |
| Sept 17, 2026 | +0.25 | 3.75%-4.00% |
How the pass-through works
- No formula. Savings rates are set by each bank. A Fed cut lowers what banks pay for funding, and competing banks usually trim savings rates over the following weeks.
- Online banks move more. Banks paying 3% to 4% have room to cut; big branch banks near the 0.37% national average have little.
- Hikes pass through less reliably than cuts. Nothing obliges a bank to raise its savings rate after a Fed increase.
- Locked rates do not move. A CD or MYGA opened before a cut keeps its rate for the term.
Rates expire like milk.
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Hypothetical: $100,000 in savings through four quarter-point cuts
| Point in the cycle | Savings APY (hypothetical) | Annual interest at that rate |
|---|---|---|
| Today | 3.50% | $3,500 |
| After cut 1 | 3.25% | $3,250 |
| After cut 2 | 3.00% | $3,000 |
| After cut 3 | 2.75% | $2,750 |
| After cut 4 | 2.50% | $2,500 |
Four full pass-through cuts would take $3,500 a year of interest down to $2,500 on the same balance.
What to do with money you will not need soon
Lock the rate for the term. The best 3-year CDs paid about 4.40% to 4.55% APY and the best 5-year CDs about 4.35% to 4.50% (DepositAccounts, updated 09/25/2026). A-rated-or-better 5-year MYGAs paid roughly 5.50% to 6.05%, tax-deferred.
Marcus savings vs. a 5-year MYGA
Savings is the right home for emergency money. For money you will not touch for three to five years, a multi-year guaranteed annuity fixes a higher rate and defers the tax.
| $250,000 for 5 years | Marcus savings (if 3.50% held) | 5-yr MYGA at 5.50% |
|---|---|---|
| Rate | 3.50% APY, variable | 5.50%, fixed for the term |
| Tax on interest | Every year (1099-INT) | Deferred until withdrawn |
| Value after 5 years, after 24% federal tax | ~$283,100 | ~$308,300 (tax paid at the end) |
| Protection | FDIC, $250,000 per depositor, per ownership category | Insurer claims-paying ability + state guaranty association (limits vary by state) |
| Getting money out | Any time | Surrender charge above the free-withdrawal amount; IRS 10% penalty before 59½ |
About $23,200 more after tax on the MYGA if the savings rate held all five years (24% federal bracket, state tax ignored). Savings rates are not fixed, so the real gap depends on where they go. Fixed annuity benchmark: carriers rated A or better topped out around 5.50% to 6.05% on 5-year compound-interest MYGAs, per public carrier rate sheets, October 14, 2026. Rates vary by state, premium and carrier.
Annuity vs CD · Current MYGA rates · HYSA or MYGA for 3-year money
Related: Best HYSA rates · Best CD rates · CD rates after Fed cuts
Fed moves and savings rates: FAQ
What happens to my HYSA rate when the Fed cuts rates?
It usually falls, but not automatically. No online savings account is contractually tied to the federal funds rate; each bank decides when and how much to move its variable rate. Rates already locked in a CD or MYGA do not change.
What is the federal funds rate now?
3.75%-4.00%. On September 16, 2026 the FOMC raised the target range by 0.25 point, effective September 17. The effective federal funds rate was 3.88% on September 23, 2026 (New York Fed).
Did the Fed cut rates recently?
Not in 2026. The Fed cut a total of 1.75 points from September 2024 to December 2025 (to 3.50%-3.75%), made no change at its 2026 meetings through July, then raised 0.25 point in September 2026.
What do top savings accounts pay now?
On September 24, 2026: Sallie Mae 3.85% APY, Marcus 3.50%, Synchrony 3.30%, Capital One 360 Performance Savings 3.10%, Ally 3.00%. The FDIC national average for savings was 0.37% (September 21, 2026).
How do I protect my interest income from rate cuts?
Lock a rate for a term: a CD (the best 3-year CDs paid about 4.40%-4.55% APY on September 24-25, 2026, per DepositAccounts) or a MYGA (A-rated-or-better 5-year MYGAs paid roughly 5.50%-6.05%, tax-deferred). Keep only emergency money in variable savings.
My take
Savings rates follow the Fed with a lag and at each bank's discretion. Keep emergency cash in savings; lock money with a known horizon in a CD or MYGA so a future cut cannot touch it.
Hans Goldstein is an independent licensed insurance producer (CA license 4273294, NPN 20602398) and is not affiliated with any bank named here or the Federal Reserve. Rates are copied from the sources named, as of the date shown; savings rates are variable and can change the day after you read this. MYGA figures are illustrations, not quotes.
Lock a rate before the next cut
Talk to Hans Goldstein, a licensed independent insurance producer.
Savings rates float with the Fed. A-rated 5-year MYGAs were paying about 5.50%-6.05% on October 14, 2026, fixed for the term and tax-deferred.
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Disclosure
This article reflects publicly available HYSA, CD, and annuity rate information approximate to the date above. High-yield savings rates are variable and change frequently, often weekly. Always confirm current rates directly with the institution before opening or transferring. This is general educational content, not a personalized recommendation, solicitation, or offer of any specific product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers in the fixed-annuity market; Goldstein & Co. LLC is not a bank, broker-dealer, or registered investment adviser. HYSAs and CDs are deposit products of FDIC-insured banks or NCUA-insured credit unions; MYGAs and other annuities are insurance contracts backed by the issuing carrier and state guaranty associations. FDIC and NCUA insurance limits are typically $250,000 per depositor per institution per ownership category. Tax discussion reflects federal law as of 2026 and is subject to change; consult a tax professional for your situation.