If you recently got a lot of money, there are important things to know if you want to put more than $100,000 into your savings account.
David Kemmerer, CEO of CoinLedger, explains, “If you deposit over $100,000 into your savings account, your bank will likely tell the IRS about it. This doesn't mean you can't do it or that something bad will happen. It just means big deposits might make people think something fishy is going on.”
So, be careful with your money moves. Here are some more things to think about when making such a big deposit.
FDIC Insurance Limits
“Knowing about FDIC insurance limits is really important,” explained Cynthia Hernandez, managing attorney for Hernandez Family Law & Mediation. “Individual accounts are insured up to $250,000. So, if you're depositing more than $100,000 but less than $250,000, your money is safe.”
But, if you're putting in more than that, it's smart to spread it out. “You might want to split your money between different banks or consider joint accounts,” she suggested. With joint accounts, each owner's share is insured up to $250,000 separately.
“Keep in mind,” added Dayten Rynsburger, chief revenue officer at Niche Capital CO, “if you go over this limit, the extra amount isn't covered if the bank goes under. So, keep your accounts within these limits or spread them out across different banks if needed.
Interest Rates
“Usually, savings accounts don't offer high interest rates compared to other investments,” noted Rynsburger.
He mentioned that with big balances, the growth might be slow. “Think about options with higher returns like high-interest savings accounts or certificates of deposit.”
Hernandez added, “Think about how this could affect your earnings. Sometimes, with bigger deposits, you can negotiate better rates, especially with high-yield savings accounts. Talk to your bank to see what they can offer based on your deposit size.”
Jonathan Feniak, general counsel at LLC Attorney, warned that banks often change their rates, so having a lot of money in one account might not give you the returns you expect. Keep an eye on any changes in interest rates.
Liquidity vs. Return
“Think about how much you need quick access to your money versus how much you want to make from it,” advised Rynsburger. “While savings accounts let you get to your cash easily, investing in things like stocks or bonds could grow your wealth more, depending on how much risk you're comfortable with and what you want to achieve financially.
Consider Hiring an Expert
If you have a lot of money in savings accounts, it's important to think about estate planning and investing differently,” Hernandez explained. “Talking to a certified divorce financial analyst, which is a role I'm certified in, can give you advice that's customized to make the most of your big savings, so your money helps you reach your financial goals effectively.
Prioritize Tax Implications
“The interest you make from a big sum might push you into a higher tax bracket, so planning is really important,” emphasized Feniak.
Other experts stressed the importance of thinking about taxes too.
“Firstly, it's important to save, but for what?” questioned Shane Correia, attorney and deputy director of government relations at the Center for Justice Innovation. “A financial advisor once told me, ‘You don't need a river as your moat against financial threats.' It took me a while to accept that because of my past experiences with homelessness and a scarcity mindset.”
He continued, “As a lawyer, it's crucial to know that any deposit over $10,000 gets reported to the IRS, and so does the interest you earn. While the Inflation Reduction Act targets earners making over $400,000 a year — in income, not net worth — it's important to develop good habits around tax strategies, and this is a good place to start.”
Optimize for Growth
“First, calculate how much money you need for 3-6 months of expenses,” advised Correia. “That's what should be in a high-yield savings account that you trust.”
He mentioned that some great options offer no fees, refunds on ATM withdrawal fees, Zelle, and high yields. “Once you have that set aside, you can focus on growing your money.”
Correia suggested Roth IRAs as a good option because any growth isn't taxed as long as you withdraw it after retirement. “Considering that only a small percentage of millennials are on track for a comfortable retirement, this seems like a safe place to invest up to the maximum annual contribution allowed.”