Money Market Accounts: Is It Time to Move Your Cash?

Tax season is winding down — and for many people, that means cash sitting in money market accounts that may no longer be working as hard as it could. Whether you’re expecting a refund or you’ve adjusted your withholding to avoid giving the government an interest-free loan, this is the right time to reassess how your cash is allocated.

Over the past couple of years, parking money in money market accounts made perfect sense. But with rates declining and the market delivering strong returns, the opportunity cost of keeping cash on the sidelines is growing.

Why Money Market Accounts Made Sense

Between 2022 and 2024, the Federal Reserve aggressively raised interest rates to combat inflation. Money market account rates climbed above 5% APY — typically delivering attractive returns while keeping your principal less volatile and liquid. For emergency reserves, short-term savings, and minimizing impact during periods of market volatility, money markets were a smart choice.

That calculation is changing. Here’s why it might be time to take the off-ramp.

Why Now Is the Time to Reassess

Rates Are Declining

The Federal Reserve cut rates three times in 2025 and held steady in early 2026, with the federal funds rate now at 3.50–3.75%. As a result, money market account rates have dropped from their 5%+ peak to around 3.5–4% APY today — and they’re expected to continue declining.

While 4% is still attractive compared to historical averages, the trajectory is clear: these rates won’t last.

The gap between money market returns and market returns has widened significantly. While past performance doesn’t guarantee future results, keeping excess cash in money market accounts means accepting a known lower return when your investment timeline allows for market participation.

Tax Season Timing Creates an Opportunity

If you’re receiving a tax refund, you have a decision to make about where those funds should go. If you’ve adjusted your withholding to avoid overpaying quarterly, you now have more cash flow throughout the year that needs a home.

Either way, tax season is a natural checkpoint to review your cash allocation and ensure it aligns with your financial plan.

What to Do With Excess Cash

Not all cash should leave money market accounts. Strategic cash reserves remain essential for emergencies, near-term expenses, and financial flexibility. Here’s how to think about your cash allocation:

When to Keep Money in a Money Market Account

• Emergency reserves: 3–6 months of essential expenses should remain liquid and accessible.
• Short-term needs: Any money you’ll need within the next 12–18 months — home down payment, upcoming tuition, planned purchases — belongs in cash.
• Upcoming tax payments: If you pay quarterly estimated taxes, keep those funds readily available.

When to Consider Moving to the Market

• Excess emergency fund: If your emergency reserves have grown beyond 6 months of expenses, the excess could work harder in diversified investments.
• Long-term savings: Money you won’t need for 3–5+ years should be invested according to your risk tolerance and time horizon — not sitting in cash earning declining returns.
• Tax refunds: Unless you have an immediate use for a tax refund, consider directing it toward retirement accounts, taxable investment accounts, or debt reduction rather than adding it to money market balances.
• Opportunity funds: Cash you’re holding to “wait for a better entry point” is often better deployed systematically over time rather than trying to time the market. This is called dollar-cost averaging, and we can discuss a timeline to introduce cash into your investment account.
• Income planning: If you are less than 10 years from retirement or already retired, it may make sense to explore income planning with these cash reserves.

A Few Important Reminders

This isn’t about timing the market. Trying to predict short-term market movements is a losing game. This is about having an appropriate allocation based on your timeline, risk tolerance, and financial goals.

Dollar-cost averaging can help. If you have a substantial cash position you want to deploy, consider deploying it gradually into the market over several months rather than all at once. This can help smooth out short-term volatility and reduce the psychological burden of “picking the right moment.”

Markets fluctuate — that’s normal. After three consecutive years of double-digit gains, it’s reasonable to expect more modest returns or even periods of decline ahead. The question isn’t whether markets will be volatile, but whether your cash allocation matches your actual needs and timeline.

Your situation is unique. The right cash allocation depends on your age, income stability, risk tolerance, upcoming expenses, and overall financial picture. There’s no one-size-fits-all answer.

Planning Your Cash Allocation

Deciding how much to keep in money market accounts versus moving to investments requires looking at your complete financial picture. We can help you think through your investment positions, cash needs, time horizons, and how different allocation strategies align with your goals.

If you’re sitting on excess cash and wondering whether it’s time to take the money market off-ramp, schedule a consult with our team.

Opinions expressed are those of Chris Hilyer and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. The foregoing is not a recommendation to buy or sell any individual security or any combination of securities. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues; these matters should be discussed with the appropriate professional.