3 best places for retirees to keep their savings

According to Northwestern Mutual, the average baby boomer will have $120,300 in retirement savings by 2024. But ideally, you’ll reach your golden years with more savings than that.

It’s important to find the right home for your retirement savings so you can not only access cash when you need it, but also continue to grow your wealth as you age. With that in mind, here are three options for retirement savings that work in conjunction with each other and should be strongly considered.

1. Savings account

Workers are always advised to maintain an emergency fund for unplanned expenses, such as home or car repairs or periods of unemployment. As a retiree, you don’t have to worry about the latter since your reporting day for work has passed. However, you may end up with quite a few unexpected bills. For this reason, it’s important to keep some of your nest egg in a regular savings account.

This isn’t that difficult, since savings accounts are paying pretty generously these days. Things may change over time, and interest rates may drop significantly so you may not be making as much money on the money you keep in the bank. But regardless, it’s important to always have easy access to cash, and a savings account provides just that.

2.CD

During retirement, it’s important to do what you can to further increase your savings while minimizing risk. People in their 20s and 30s often can afford to invest most of their savings in the stock market because they have decades to weather a recession. As a retiree who has to live off your savings, you no longer have that luxury.

That’s why it’s a good idea to keep some of your retirement savings in cash. This way, even if the stock market plummets during retirement, you can avoid liquidating your investments when their value declines.

But when it comes to maintaining your cash savings, there are more options than a regular savings account. You can also open a CD and keep some of your money there.

CD interest rates tend to be higher than savings account rates. And more importantly, CDs can be a predictable source of income in retirement because the interest rate you lock in when you open a CD is a guaranteed rate until the life of the account expires.

But if you want to keep some of your retirement savings in a CD, set up a ladder to release cash at various intervals. In fact, if you know you’ll likely need to live off that cash, it’s a good idea to set up a CD ladder with CDs maturing monthly or bimonthly.

3. Roth IRA or Roth 401(k)

It’s a good idea not to go ~ degree Even if you are heavily invested in stocks in retirement, you should maintain your stock portfolio to ensure your nest egg continues to grow. A Roth IRA or Roth 401(k) may be the best place to house these investments.

Both Roth IRAs and Roth 401(k)s offer tax-free withdrawals. This is important at a time when your income may be lower than what you earned during your career because you are not working.

Additionally, the money you continue to invest in your Roth IRA or Roth 401(k) can continue to grow tax-free throughout retirement. And you may need that money to live on, but if not, you can leave it alone and continue to grow indefinitely. Unlike traditional IRAs or 401(k)s, Roth accounts do not impose required minimum distributions.

Ultimately, it’s a smart idea to keep your retirement savings in a variety of assets. Using cash means you don’t have to take on the risk of market events affecting the value of your money. With stocks, you take on risk but ultimately enjoy greater profits which gives you more spending power. Dividing your retirement savings between savings accounts, CDs, Roth IRAs, or Roth 401(k)s can give you the best of all worlds.

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