Good find! GMAC’s Money Market is FDIC insured and pays 4.75% APY. Their CD pays 5.35%, but I think it is for 5 years.

I opened a CD at World Savings, 4 months, 5.11% APR. It is the highest in the country, but I have to lock up my money for 4 months. If you like the 24/7 access, you only give up .35% for GMAC. For me, I earn several hundred dollars a year more at World Savings, so I go with the highest rate. I will not need my money for 3-5 years. For asianautica, it is more important to have 24/7 access, so he found a very good rate for his needs.

The advice I give is very general. I do not feel comfortable giving you specific advice, because I do not know your tax situation. For example, a few months ago when I met with my CPA, he told me to do a Roth IRA instead of a regular IRA.

That said, there are several options for cash. You can buy Treasury notes from treasurydirect website. As long as you get a 90-day, or 6 month, and hold until expiration, you will not lose any principal. If you sell before maturity and the interest rates have gone up, your note is worth less.

Money markets are another option, but many are not FDIC insured, and may hold mortgage backed securities and short term corporate debt, and could be at risk if Fannie Mae becomes insolvent. I fully expect Fannie Mae to become insolvent in the next 3 years, but the government will bail them out, so look for either a tax increase or more dollar printed, probably $300 billion, to pay for it. My brother who has studied this more, said if 3% of Fannie Mae’s loans become insolvent, they become insolvent too and it would set off a derivatives and banking crisis. The government would quickly step in to avoid a banking crisis. Nonetheless, I would rather avoid that whole scenario, because who knows how it all finishes? And it’s not hard to imagine that 3% of loans will become insolvent in the next few years.