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It’s important to find the best home for your money. Here are three options to look at this month. [[{“value”:”

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Some people are continuing to live paycheck to paycheck these days even in light of cooling inflation. And that’s truly unfortunate. But if you’re someone whose personal finances are in a better place, you may find yourself with money left over this month that isn’t earmarked for immediate bills. And if so, here are three places to consider putting it.

1. A CD

If you need the spare cash you have on hand for emergency fund purposes, then a savings account is the best place to put it. Otherwise, it’s a good time to open a CD.

CD rates remain elevated following a string of interest rate hikes from the Federal Reserve. But the central bank is expected to cut rates at some point in 2024. From there, CDs will likely start to offer lower rates. So it pays to lock in a higher one while you can.

Right now, you may find that you’re able to snag a higher interest rate on a 1-year CD than on a longer-term CD, like one with a three- or four-year term. But you may want to consider a longer-term CD because if the Fed begins cutting interest rates steadily, the CD rates available today may not resurface for a really long time.

2. An IRA

If you’re eager to save money for your retirement, an IRA is a great choice. With an IRA, you’ll get a tax break on your contributions (assuming you stick to a traditional account, rather than a Roth IRA), which can shield more of your income from taxes.

But it’s not necessarily your 2024 IRA you want to save in this month. If you didn’t max out your 2023 IRA, that account is the one worth funding in March.

In 2023, IRAs maxed out at $6,500 for workers under 50 and $7,500 for those 50 and older. And you actually have until this year’s April 15 tax-filing deadline to finish funding your 2023 IRA.

So let’s say you’re 35 years old and you only put $5,000 into your 2023 IRA. If you now have another $1,500 at your disposal, you can add it to that account to shield an additional $1,500 of income from the IRS’s reach.

Meanwhile, let’s say you fell into the 22% tax bracket in 2023. Putting an additional $1,500 into last year’s IRA could result in an extra $330 in tax savings.

3. A 401(k)

If you didn’t max out your 401(k) in 2023, it’s too late to add to that account now. But it’s also a great time to make contributions into this year’s 401(k).

Vanguard reports that 95% of employer-sponsored retirement plans, like 401(k)s, offer some type of matching contribution. So if you put money into your 401(k) this month, you might get a matching sum from your employer. That’s money you can then invest and grow into a larger sum over time.

Let’s say your employer will match up to $3,000 a year in 401(k) contributions, or $250 a month. If you get a free $250 from your employer now and keep that sum invested for 40 years at an average annual 10% return, which is consistent with the stock market’s long-term average, it could grow into over $11,300. And while that’s obviously not enough money to retire on completely, it’s a nice sum to eke out of a $250 contribution — especially one you were given for free.

You have plenty of options for finding a home for your extra money this month. But it especially pays to look at a CD before rates start to drop. And you can also reap a lot of benefits by putting your money into an IRA or a 401(k).

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