As the world economy has suffered several set backs within past few years, many employers are forced to either decrease the amount of money they match in 401k plans or totally cut off 401k matching to stay afloat & profitable. As this practice became increasingly more popular among organizations, individuals began searching for alternative ways of saving for their retirement. Although many people selected to put their future retirement savings in normal savings accounts, a large majority of people selected a new, safer, and more effective route- a money market account .
A money market account is in essence a savings account which usually offers a considerably higher interest rate than that of an usual savings account. Banks are able to offer higher interests on these kinds of accounts for several reasons. One reason is due to the intended use of the deposited money itself. Banks use the money in money market accounts to invest in govt. and corporate securities & subsequently pays the depositor based on the present interest rates within the money market. Moreover, restrictions are applied to the accounts which require that a bigger amount of money remain deposited in them than in conventional savings accounts. Banks are also permitted to charge fees if the account has funds withdrawn from it more than the permitted amount of times in a given time period. Although there're more limitations on a money market account than a conventional savings account, the exponentially higher interest rates it draws more than enough make up for the limitations.
Another reasons why money market accounts are becoming increasingly accepted is because of their relative safety in relation to 401k plans that hinge mostly on the success of an individual's employer generally as the funds in the 401k plan are consisted of stock within a given company. In addition, unlike a 401k plan, the money in a money market account are insured by the FDIC like a traditional account so there's no risk of totally losing it if a bank closes. Additionally, the penalties for withdrawing money from a money market account are generally less severe than that of a 401k plan and allow a fixed number of withdrawals a month.
When using a money market account, among the most practical tools an investor can use is that of a money market calculator. An individual can analyze their money market account and its respective characteristics like the initial and current deposited amount, the current interest rate, length of estimated account duration, annual percentage yield, compounding interest, and so on and employ a money market calculator to estimate the expected value of the account over a given time period. Using a money market calculator will permit you to efficiently manage your account along with plan for the future based on the estimated funds available at a future date.
Many online sites offer free money market calculators for individuals to use and these easy tools can successfully help you plan your future and manage, track, and estimate your expected savings targets.
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