What Retirees Are Doing with Cash in 2025: Smart, Safe, and Strategic

Retirees 

In 2025, the question of what to do with cash isn't just for Wall Street—it’s become one of the most important portfolio conversations for retirees across the United States. After two years of elevated interest rates, cooling but persistent inflation, and a market that refuses to follow a predictable script, retirees are sitting on record levels of cash. But instead of letting that cash languish in traditional savings accounts yielding barely more than 0%, many retirees are taking a more strategic approach. They’re deploying cash tactically—preserving capital, generating income, and minimizing tax exposure—without taking on the kind of risk that could jeopardize their retirement goals.

The biggest shift in 2025 is that cash is finally paying again, but not all cash is created equal. While national average savings account yields still hover around 0.4% at big-name banks, retirees are turning their attention to Treasury bills (T-bills), high-yield savings accounts (HYSAs), and money market funds. Treasury bills, in particular, have become a go-to option. Offering yields north of 5% with maturities as short as four weeks, T-bills provide safety (backed by the U.S. government), liquidity (especially when purchased via brokerage), and state and local tax advantages, which are crucial for retirees living in high-tax states. Many retirees are laddering these T-bills across maturities—30, 60, 90, and 180 days—to ensure both income and rolling liquidity without interest rate risk.

High-yield savings accounts are also seeing heavy inflows, especially among retirees who want daily access to funds without sacrificing yield. Many online banks are offering APYs between 4.5% and 5.0%, and while these rates can adjust downward quickly if the Fed pivots to easing, they remain far more attractive than traditional brick-and-mortar options. For retirees using “bucket strategies” to segment cash for near-term, mid-term, and long-term needs, HYSAs serve as the first-line buffer—the money you might need tomorrow or next week. In 2025, these accounts are being integrated into financial plans not just for their rates, but for their flexibility and ease of use.

Money market funds (MMFs), long seen as a parking lot for institutional cash, are also gaining favor in the retirement community. Firms like Vanguard and Fidelity are offering MMFs with 7-day yields between 4.7% and 5.1%, and these funds are now available inside IRAs and brokerage accounts with no minimums. Retirees appreciate that MMFs invest in a diversified pool of short-term instruments like T-bills and commercial paper, and they offer daily liquidity with automatic sweep features. Unlike bank accounts, they’re not FDIC-insured—but they are considered very low risk, especially when limited to government or Treasury-only funds.

CDs (Certificates of Deposit) are also back in the mix, especially for retirees with clear time horizons. In 2025, 1- and 2-year CDs are yielding between 5.0% and 5.6%, and many retirees are laddering CDs just as they are T-bills. But unlike T-bills, CD interest is fully taxable at all levels, and liquidity is limited unless early withdrawal penalties are acceptable. Still, for retirees using CDs inside tax-advantaged accounts or who are certain they won’t need access to those funds early, they’re providing a sense of security and fixed return that’s been absent for over a decade.

Beyond short-term instruments, a growing number of retirees are also turning to ultra-short and short-duration bond ETFs, like JPST (JPMorgan Ultra-Short Income ETF) or VCSH (Vanguard Short-Term Corporate Bond ETF). These funds provide slightly higher yields than T-bills or CDs, and they come with diversified exposure to investment-grade debt. While there’s still some risk involved, especially in credit quality, these ETFs offer monthly income and can serve as a middle ground between cash and bonds. Some retirees are even using them inside taxable brokerage accounts for supplementary income while avoiding equity market volatility.

One of the most important reasons retirees are managing their cash more actively in 2025 is sequence-of-returns risk. The danger of withdrawing from equities during a market downturn early in retirement can severely damage portfolio longevity. By using T-bills, HYSAs, and MMFs to cover 1–2 years of living expenses, retirees are creating a cushion that lets them ride out market volatility without selling growth assets at a loss. It’s a classic defensive strategy, but one that makes even more sense now that cash equivalents are yielding enough to matter.

Taxes remain a huge consideration. Interest from bank accounts and CDs is fully taxable, while T-bills and most money market funds are exempt from state and local taxes. For retirees in places like California, New York, or Oregon, this can mean hundreds or even thousands of dollars in savings each year. More and more financial advisors are tailoring cash management strategies to maximize after-tax yield, not just the headline APY.

What’s equally notable in 2025 is the attitude shift. After years of being told “cash is trash,” retirees are realizing that cash is a tool, and it’s back in style. It’s not just about stashing money under the mattress or in a checking account. It’s about layering maturity, diversifying yield, and managing risk. With new digital tools and broker integrations, retirees can now set up automatic ladders, reinvest maturing T-bills, and allocate across MMFs and HYSAs with just a few clicks. Platforms like Fidelity, Schwab, and Vanguard have responded by making these tools more accessible than ever.

In the end, what retirees are doing with cash in 2025 is no longer passive—it’s tactical. Whether it’s parking emergency funds, planning for RMDs, or creating a flexible income stream, cash is a critical asset class in the retirement playbook. And with real returns back on the table, the message is clear: for the first time in years, cash isn’t just safe—it’s smart.