The good news is that there's a higher-yielding alternative to "cash" investments like savings accounts and money market funds that carries only slightly more risk: municipal bonds. Muni bonds -- and the funds that invest in them -- also have the advantage of being partly or fully tax-free: you don't have to pay federal income taxes on the income, and if you buy bonds or funds that invest solely in your own state's municipal bonds, you can forego state and local taxes, too. (Check with your accountant to make sure.)

Because of the tax advantage, municipal bond funds are especially attractive for investors in the highest tax bracket (for 2016, single filers making $415,051 or more, or joint filers making $466,951 or more); the taxable-equivalent yield declines for taxpayers in lower brackets.

While it's possible to invest in individual municipal bonds, it's smart to use mutual funds for your muni investments. A well-run diversified fund invests in a wide range of bonds (T. Rowe Price Tax-Free Income Fund (MUTF: PRTAX), for example, currently owns 442 bonds) -- which minimizes the damage should a bond be downgraded or an issuer defaults (a rare occurrence with investment-grade muni bonds in any case). Professional management also allows for identification of undervalued bonds and continual reinvestment into higher-yielding bonds if interest rates rise.