Cash Management for Millionaires: Where to Keep $250K–$1M+ in Cash (2026)

Most millionaires keep too much in savings accounts and too little in Treasuries — and pay thousands of dollars a year in avoidable state income tax as a result. The 12-month T-bill yields 4.00% and every dollar of interest is state-tax-exempt. A high-yield savings account at 4.25% is federally identical — but fully taxable at your state rate. For a California investor in the 13.3% bracket, that difference is worth 0.53 percentage points per year on every dollar held. On $500,000 in cash, that's $2,650 annually in avoidable tax. This guide explains the full cash management toolkit for $1M–$5M investors and includes an interactive after-tax yield calculator so you can see the numbers at your specific bracket.

The cash problem at $1M+

At $1M–$5M in investable assets, cash management is not trivial. You face three problems simultaneously:

1. FDIC limits cap savings account coverage at $250,000 per ownership category per bank. A $500,000 HYSA at one institution leaves $250,000 uninsured. Spreading across banks solves coverage but creates operational complexity.
2. High-yield savings interest is fully taxable — federal and state. At a combined 48–50% marginal rate (37% federal + 13.3% California, for example), a 4.25% HYSA yields only 2.2% after tax. T-bills at 4.00% yield 2.5% after tax at the same rate, because Treasury interest is state-exempt.
3. Cash drag compounds. Keeping 12–18 months of expenses in cash makes sense as an emergency buffer. Keeping 24+ months earns below-market after-tax returns and drags long-term wealth. The question is not just where to keep cash, but how much to keep.

FDIC limits: understanding your actual coverage

The FDIC insures deposits at member banks up to $250,000 per depositor, per ownership category, per insured institution.¹ This is not a limit on total deposits — it is a limit per bucket of ownership type.

Practical coverage for a married couple at one bank: individual ($250K) + joint ($500K) + revocable trust with 2 children ($500K) = $1.25M fully insured at a single institution. Most $1M–$5M investors can get adequate coverage at 1–2 banks by using multiple ownership categories.

Beyond FDIC: IntraFi ICS and CDARS

Some banks offer IntraFi's ICS (Insured Cash Sweep) network, which automatically sweeps deposits above $250K to other FDIC-insured institutions while maintaining one account relationship. This extends FDIC coverage to several million dollars per depositor. Rates are typically slightly below top HYSA rates — the convenience premium. If simplicity matters more than squeezing yield, ICS is worth knowing about.

The elegant alternative: U.S. Treasuries

Treasury bills, notes, and bonds are direct obligations of the U.S. government — not FDIC-insured, but backed by the full faith and credit of the United States. There is no coverage limit. A $2M T-bill position at Fidelity carries the same credit quality as a $20K position. For cash held outside FDIC limits, Treasuries are the cleanest solution — and they carry the state tax advantage described below.

The state tax advantage of U.S. Treasuries

Under 31 U.S.C. § 3124, interest from U.S. Treasury obligations — including T-bills, T-notes, T-bonds, TIPS, and most government money market funds — is exempt from state and local income taxes.² HYSA interest, brokered CD interest, and corporate bond interest carry no such exemption.

The break-even math is simple: a T-bill only needs to yield below the after-state-tax HYSA yield to tie. At equal gross yields, the T-bill always wins in a high-tax state.

The cash management toolkit: 2026 comparison

T-bills: the workhorse of high-net-worth cash management

For most $1M–$5M investors in high-tax states, T-bills — particularly the 3-month and 6-month maturities — are the primary cash management instrument for everything above FDIC-covered savings. Here's why:

• No coverage cap. A $2M T-bill ladder at Fidelity, Schwab, or TreasuryDirect carries no credit risk, unlimited in size.
• State tax exempt. Under 31 U.S.C. § 3124, all Treasury interest bypasses your state return. For California at 13.3%, this saves $5,320 per year on $400,000 in T-bills vs. a HYSA at equal gross yield.
• Predictable maturity. A T-bill ladder — buying equal tranches of 4-week, 8-week, 13-week, and 26-week bills — creates a rolling cash flow of maturing principal every four weeks, which you can reinvest or spend.
• Auto-rollover at TreasuryDirect. You can set T-bills to auto-reinvest at maturity — no action required, no rate-hunting. Rates reset with each rollover.

How to buy T-bills

• TreasuryDirect.gov — buy at auction directly (no brokerage account needed, no fees, no intermediary). T-bills settle next business day after auction. Auto-roll is available.
• Brokerage account (Fidelity, Schwab, Vanguard) — buy at auction or secondary market; simpler interface than TreasuryDirect; 1099-INT handled by broker. New-issue T-bill purchases have no brokerage commission.

Government money market funds: instant liquidity, near-Treasury yield

Government money market funds (SPAXX, VMFXX, Schwab SWGXX) hold primarily U.S. Treasury bills and government agency securities. Because their holdings are overwhelmingly Treasury obligations, most of their income qualifies for state tax exemption — though the exact exempt percentage varies slightly by fund and year (look for the fund's annual "U.S. government obligations" percentage in your 1099 supplement).

• Fidelity SPAXX (Government Money Market): 3.28% 7-day yield as of June 12, 2026. Used as Fidelity's default cash sweep — any uninvested cash earns this rate automatically.
• Vanguard VMFXX (Federal Money Market): 3.63% 7-day yield as of mid-June 2026. Requires opening the position but yields slightly more than SPAXX.

Both are significantly below current T-bill yields (3.83–4.00%). The trade-off is instant liquidity — you can withdraw from a money market fund on the same day, while a T-bill requires waiting for maturity or selling in the secondary market. For emergency reserves that you need to access within days, money market funds are appropriate. For cash you can commit for 3–12 months, direct T-bills win on yield.

Prime money market funds: more yield, less state exemption

Prime money market funds (e.g., Fidelity FZFXX, Vanguard VMRXX) hold short-term corporate paper, bank CDs, and repurchase agreements in addition to Treasuries. They typically yield 0.1–0.3% more than government funds — but their income does not qualify for state tax exemption. For high-state-tax investors, the extra yield often disappears after state taxes, making government money market funds the better after-tax choice.

High-yield savings accounts: FDIC coverage and rate reality

HYSAs remain the simplest tool for the first $250,000–$500,000 of cash at a single institution. Current leading rates (June 2026): Marcus by Goldman Sachs 4.25%, Discover 4.25%, American Express 4.25%, Ally 4.20%.⁴

The limitations at $1M+:

• FDIC coverage gap. Above $250K per ownership category, deposits are uninsured. Most investors spread across 2–3 banks, which adds operational friction but solves the coverage problem.
• State tax drag. HYSA interest is fully state-taxable. In California, a 4.25% HYSA nets 2.21% after 37% federal + 13.3% state tax. A 4.00% T-bill nets 2.52%. The T-bill wins despite a lower gross yield.
• Rate variability. HYSA rates track the Fed Funds rate — they declined when the Fed cut rates in 2024–2025 and will decline again if the Fed cuts further. T-bill rates also move, but you lock in the current rate for the term when you buy.

Brokered CDs: FDIC coverage with brokerage convenience

Brokered CDs are bank CDs purchased through a brokerage. Each CD is FDIC-insured for up to $250,000 at the issuing bank (not the brokerage), and a single brokerage account can hold CDs from dozens of different banks — giving you FDIC coverage on millions of dollars without managing multiple bank accounts.

Current 1-year brokered CD rates at Schwab and Fidelity: approximately 4.00–4.30% as of June 2026.⁷

Two important caveats:

• Callable CDs. Many brokered CDs are callable — the issuing bank can redeem them early if rates fall. This means you get the call risk of bonds with CD-level yield. Favor non-callable CDs for predictable cash flow.
• State taxability. CD interest is fully taxable at the state level — no Treasury exemption. At equal gross yields, a T-bill beats a brokered CD in every high-tax state.

How much cash should you hold?

Cash drag is real. At $2M in investable assets, the difference between 3.5% after-tax yield on cash and 7% expected long-term equity return is 3.5 percentage points per year. On $400,000 sitting in cash instead of invested, that's $14,000 per year in opportunity cost.

A practical framework for $1M–$5M:

If you're holding cash above tier 3, the question worth asking is: what are you waiting for? If the answer is "I'll invest when the market dips," you're practicing market timing — which underperforms in the long run. Research on lump sum vs. dollar-cost averaging consistently shows that deploying cash immediately beats waiting in most scenarios.

After-Tax Cash Yield Calculator

Enter your tax situation to see the after-tax annual yield and income for each instrument at your allocation amount. Rates as of June 18, 2026.

The cash ladder: a practical implementation

Rather than putting all cash into one instrument, most $1M–$5M investors benefit from a simple 3-tier ladder:

As tier 2 T-bills mature every 90–180 days, you reinvest the proceeds automatically or let them flow to tier 1 if you need the cash. The whole structure takes about 30 minutes to set up at TreasuryDirect or your brokerage and then runs on autopilot.

How a fee-only advisor approaches cash management

A fee-only advisor who works with $1M–$5M investors typically does two things in cash management that most clients don't do on their own:

1. They integrate cash with your full tax picture. If you're doing a Roth conversion this year that will push your federal rate from 24% to 32%, the optimal cash instruments shift — the state exemption advantage of T-bills grows as your federal rate rises. Advisors model this holistically.
2. They enforce cash discipline. Clients with $3M in investable assets who hold $800K in cash "waiting for the right time" are leaving $25,000+ per year in expected returns on the table. An advisor with fiduciary duty will flag this and help you deploy the excess systematically via lump sum or scheduled investing.