@jespy Yes, you are exactly right that putting the money in a high yield savings account at 4.6% interest is much better than what you have now. But if you have to tie up your savings for a full year to get the rate, you could just buy a CD instead and get even higher interest. (There is probably a higher penalty if you pull your money out early with a CD.)
For terms of 1 year, CDs are still yielding more than government bonds. For longer periods, I think that bonds have caught up by now. Check the rates to confirm.
BUT - -with $220k, you really should be in a diversified portfolio of stocks + bonds + cash, ESPECIALLY if you are young and have many years to wait out any stock market volatility. Generally speaking, after you have stashed an emergency fund in a high yield savings account (one having no withdrawal penalty), you should invest the rest.
Here are some GENERAL rules of thumb (but keep in mind that everyone's situation and financial responsibilities are different, so your mileage may vary. . . by quite a lot . . . so be careful)
if you are in your 20s: emergency fund should be 3 - 6 months of living expenses and the rest should be invested. You should start saving for retirement outside your 401k, and invest that money at something like 80/20 stock/bond. You have many years to recover from any stock losses, PROVIDED you have the discipline to keep the money invested. If you are saving for a house or something and you will need part of this money in, say, 3-6 years -- invest that part more like 30/70 stock/bond or even 20/80. You should have both: a retirement fund outside your 401k and a fund for shorter term goals like a house. Don't use the money in your retirement fund to pay for a house.
in 30s: 6-12 months emergency fund & 70/30 stock/bond for retirement investments
in 40s: 9 - 18 months emergency fund and 70/30 or 60/40 for retirement investments depending on your financial situation and your taste for risk
in 50s: 1-3 years emergency fund (in case you lose your work income. Lots of people get laid off in their fifties). One year should be in high yield savings with no restrictions on withdrawals. The other 2 years can be in CDs or short term bond funds to capture higher interest rates. 60/40 for retirement investments
in 60s: 3-5 years emergency fund. 1-2 years in HY savings, 3-4 years in CDs or short term bond funds or individual bonds, and 60/40 or 50/50 for investments that will fund your later old age
I would suggest starting with some ETFs like an S&P 500 ETF for stocks and a medium-term bond fund for bonds. As your wealth increases, add a small company ETF and an international company ETF. If you are holding the bonds in a taxable account, not a 401K, consider buying muni bond funds because the income they generate will be tax-free. The yield will be lower. You have to calculate whether the tax savings makes up for the lower yield. The answer depends on your income and tax bracket. For stocks in a taxable account, choose ETFs, not mutual funds and -- in my opinion -- not individual stocks. Buy the whole market, it is much less risky.
Good luck!
