Where to Park Windfall Money While You Decide

Why parking comes before investing

Every major windfall planning framework — from what to do after a windfall to the 90-day checklist — starts with the same instruction: pause. The goal of the first 90 days is not to grow the money. It is to protect your options.

Three things must happen before any serious capital deployment makes sense:

1. Tax reserve separated. Depending on the windfall source, 20–50% of the gross amount may be owed in taxes within the next 12 months. That portion should never go into investments. It belongs in something liquid and safe.
2. Near-term commitments identified. Debt payoff, home purchase, family support, and planned spending within 24 months are not investable capital. Identify them before you think about portfolio construction.
3. An advisor engaged. A specialist advisor can tell you exactly how much is investable, when it should move, and into what. Deploying capital before that conversation is the most common expensive mistake in windfall planning.

While those three things happen, your cash needs a place to sit. That's what this guide covers.

Option 1 — FDIC-insured bank accounts

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per depositor, per FDIC-insured institution, per account ownership category.¹ If your bank fails, you get that money back. It is as close to risk-free as a deposit can get.

For a windfall significantly larger than $250K, a single savings account at one bank leaves you exposed. The coverage mechanics allow you to legitimately multiply it:

Spreading across multiple FDIC-insured banks is the simplest way to cover a large cash position. High-yield savings accounts and money market deposit accounts (not to be confused with money market funds — see below) at online banks often offer better rates than brick-and-mortar banks while providing the same FDIC protection.

A program called CDARS (Certificate of Deposit Account Registry Service) or IntraFi Network Deposits allows some banks to distribute your funds across a network of banks automatically, providing multi-million-dollar FDIC coverage through a single banking relationship.

Option 2 — Government money market funds

A government money market fund holds short-duration U.S. Treasury and agency securities. These are not FDIC insured — they are SEC-regulated investment products — but they are among the safest instruments in existence. They maintain a $1.00 net asset value per share, which has broken only once in the history of money market funds (a prime fund during the 2008 financial crisis; government funds were unaffected).

Government money market funds offer same-day or next-day liquidity, current yields that track short-term interest rates, and no minimum holding period. Schwab, Fidelity, and Vanguard all offer large government money market funds. You can hold several million dollars here without coverage concern because the underlying securities are U.S. government obligations — though check current yields at your brokerage before assuming rates are competitive, as they move with the federal funds rate.

The risk to understand: these funds are not FDIC insured. They are regulated under SEC Rule 2a-7, which imposes strict liquidity and quality requirements, but they are not deposit accounts. In practice, a government money market fund failure would require a systemic event far more severe than the collapse of any individual bank. Most financial advisors treat them as functionally equivalent to cash for short-term holding purposes.

Option 3 — Treasury bills and Treasury Direct

Treasury bills are short-term U.S. government securities maturing in 4, 8, 13, 17, 26, or 52 weeks. They are backed by the full faith and credit of the U.S. government — the safest issuer in the world. Two features make them worth considering for windfall holders:

• State income-tax exempt. Interest earned on U.S. Treasury obligations — including T-bills, T-notes, and T-bonds — is subject to federal income tax but exempt from all state and local income taxes.² For residents of high-tax states (California, New York, New Jersey, Oregon, Minnesota), this exemption meaningfully increases the after-tax yield relative to an equivalent bank deposit or corporate bond.
• No bank counterparty risk. T-bills held directly at TreasuryDirect.gov are a direct obligation of the U.S. Treasury. There is no bank or brokerage between you and the issuer.

You can purchase T-bills through TreasuryDirect.gov (direct from the government, no fees) or through a brokerage account. Brokerage-held T-bills are easier to liquidate before maturity and don't require a separate TreasuryDirect account, but you do introduce brokerage counterparty risk (covered by SIPC, see below).

A T-bill ladder — purchasing bills with staggered maturities every 4–8 weeks — keeps a portion of the position regularly maturing into cash, which preserves liquidity while maintaining competitive yields throughout the parking period.

Option 4 — Brokered CDs

A brokered CD is a certificate of deposit purchased through a brokerage account. Unlike a CD opened directly at a bank, a brokered CD can be sold on the secondary market before maturity, so you are not locked in. Crucially, each brokered CD is issued by an FDIC-insured bank — the brokerage acts as intermediary — so FDIC coverage of $250K per issuing bank per ownership category still applies.

For large cash positions, brokered CDs allow you to access FDIC coverage at many banks through a single brokerage account. A $5M cash position can be spread across 20 banks at $250K each without opening 20 bank accounts. Fidelity's CD marketplace and Schwab's CD center are the two largest platforms for this.

The tradeoff: brokered CDs may carry a slightly wider bid-ask spread if you sell early, and new-issue rates fluctuate with market conditions. For pure parking with a known short horizon, T-bills are often simpler and carry zero early-liquidation friction.

SIPC coverage for brokerage-held assets

If you park cash inside a brokerage account (in a money market fund or as the cash sweep), that account is covered by the Securities Investor Protection Corporation (SIPC) up to $500,000 per customer per brokerage, including up to $250,000 in cash.³ SIPC does not protect against investment losses — it protects against brokerage failure or fraud. For accounts larger than $500K, major brokerages carry excess SIPC coverage in the hundreds of millions. Check your brokerage's customer agreement for the specific amount.

SIPC coverage matters primarily for the cash sweep position (the uninvested cash sitting in the account between transactions). Securities and T-bills held in the account are not covered by SIPC in the same way — they are registered assets that continue to exist regardless of brokerage failure.

What does not work well for parking

Not all "safe" options are appropriate for windfall cash in the parking phase:

• Standard savings accounts at your current bank. Often pay near-zero interest. Switching to a high-yield savings account at the same institution or a different FDIC bank takes one business day and can increase yield materially.
• Prime money market funds. Unlike government money market funds, prime funds hold commercial paper and corporate bonds. They carry slightly higher risk and, unlike government funds, are subject to potential liquidity gates and redemption fees in stressed markets (per post-2023 SEC reforms). Use government funds instead.
• Annuities proposed in the first meeting. Insurance products are illiquid, carry surrender charges, and involve a commission. Any advisor who suggests moving windfall cash into an annuity in the first meeting is not operating as a fiduciary. See the advisor selection guide for red flags.
• Certificates of deposit at one bank over $250K. CD accounts are FDIC insured like any other deposit, subject to the same $250K limit. A $2M CD at a single bank has $1.75M exposed. Use brokered CDs across multiple banks instead.

Interest income and IRMAA: the hidden exposure

Parking windfall cash in T-bills, money market funds, or high-yield savings creates taxable interest income. For a large sum, that income can be substantial. Two consequences worth planning for:

Federal income tax. Interest income is taxed as ordinary income — at your marginal rate, not the lower long-term capital gains rate. At $500K in cash earning 4–5%, that is $20K–$25K in additional ordinary income. If the windfall already pushed your income into the 37% bracket, that interest is taxed at 37% (plus state, except for T-bill interest).

IRMAA 2-year lookback. Medicare Part B and Part D surcharges (IRMAA) are based on your MAGI from two years prior.⁴ If this year's income is unusually high because of a windfall, you may face higher Medicare premiums in two years even if your income returns to normal. The 2026 IRMAA first-tier thresholds are $106,000 single / $212,000 MFJ, with surcharges escalating to $628.90/month per person at the highest tier. This does not mean you should avoid interest income — it means the exposure should be modeled with the rest of the windfall's tax impact, and you can appeal using Form SSA-44 if your income has since declined.

How long should the parking phase last?

The standard guidance is 90 days. In practice, the right timeline is as long as it takes to do these things properly — not as short as possible to feel like you've acted:

• Your tax situation modeled with a CPA (who should touch the money before it deploys, not after)
• Your investable base calculated after reserving for taxes and near-term commitments
• A fee-only advisor engaged, a written investment policy drafted, and a deployment schedule agreed on
• Any family-request decisions made within a pre-agreed framework, not reactively

If you've received a business sale wire, settled a lawsuit, or had a large equity event, three months of deliberate parking while you build that framework is not delay — it is the plan. An investor who parks $3M at 4.5% T-bills for 90 days earns roughly $33,750 in interest while making dramatically better long-term deployment decisions than they would under time pressure. The opportunity cost of waiting is small; the cost of moving too fast can be permanent.

The tax reserve should be segregated

One refinement that prevents a common mistake: keep the tax reserve physically separate from the portion you plan to invest. Put the estimated tax portion in its own account or money market holding. Label it mentally (and practically) as "owed to the IRS" — not available capital. People who commingle tax reserves with investable capital routinely spend from the wrong bucket and face a tax bill they can no longer cover. See the windfall tax planning guide for how to estimate the reserve by source.