The Financial Cliff is Coming, Time to Lighten Up on Equites and Place the Funds in a Good Old Savings Account

The financial cliff of automatic government spending cuts and the Bush tax cuts expiring our heading our way. Surprisingly the equities markets believe a comprise will be made in Congress regardless of who wins the White House next week which is a leap of faith. Even if a compromise is reached it probably will be in the new year which means at least a couple of months uncertainly in the markets which is a cause of concern since the markets hate uncertainty.

With the gains of the last 12 months along with theuncertainly about the financial cliff now is probably a good time to lower your exposure to stocks and place the money in a good old fashion savings account. You could sell stocks and leave the money in a brokerage money market account but the rate you'll receive will be lower than current savings rates.

The best savings rates right now are just above 1.00 percent which is many times the FDIC national average rate. The highest savings account rates on our rate list are from CIT Bank at 1.04 percent with an APY of 1.05 percent on savings account balances of at least $25,000. CIT Bank savings rates for account balances of less than $25k still earn a savings rate of 0.90 percent with an APY of 0.90 percent.

The FDIC national average savings rate for the week ending October 29, 2012 is at 0.08 percent, exactly one thirteenth CIT Bank's savings account rate. Jumbo savings account rates are also averaging 0.08 percent in the FDIC survey this week which makes CIT Bank's rate an even better deal if you're looking for a jumbo rate.

Our rate lists also include bank money market account rates which are also higher than brokerage money market rates and the FDIC average rates. We have two banks offering money market account rates at 1.04 percent with an APY of 1.05 percent. Sallie Mae Bank and Union Federal Savings Bank are both offering money market rates at that level. Union Federal Savings Bank has a minimum opening deposit of $2,500 and Sallie Mae Bank doesn't have a minimum opening balance.

Hopefully Congress will figure out what to do with the Bush tax cuts and spending cuts in a few months which is why I recommend sticking with a savings account or a bank money market account since rates are higher on an annualized basis than short term CD rates. When the dust has cleared you can quick get back into equities, hopefully at a lower level than what you sold at and then enjoy better returns.