Secure Your Golden Years: 3 Accounts Every Retiree Needs Besides a 401(k) and IRA

If you’re retired, your 401(k) and/or IRA are likely the backbone of your financial plan. If you’ve diligently saved over decades of work, you’re likely to have a significant sum in these accounts, potentially hundreds of thousands of dollars or even more. Combined with Social Security, these accounts will be the primary sources of your retirement income.

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But there are three other types of accounts that you’ll likely need to get you through retirement, as well. Here’s a closer look at each of them and when you’ll want to use them.

High-Yield Savings Account

Just because you’re retired doesn’t mean that you no longer need an emergency fund. In fact, you might need one more than ever.

Although Medicare and other insurance may cover most of your health expenses, you’ll invariably end up paying for some costs out of pocket. And just because you’re retired doesn’t mean you’re exempt from life’s little mishaps, like unexpected home or vehicle repairs. So, it’s still a sound practice to keep at least three to six months’ worth of income in your emergency fund.

A high-yield savings account is generally the best option as a home for your emergency fund. It’s also a good choice if you are saving for any shorter-term goals, like a special vacation. This is because a high-yield savings account offers a great blend of safety, income and accessibility.

High-yield savings accounts offer $250,000 in FDIC insurance, and they pay income well above what you’d get in a traditional savings account. According to the FDIC, the average savings account pays just 0.47% as of March 18, 2024, but many high-yield savings accounts pay yields in excess of 5%. And most savings accounts offer ATM cards and online transfers to get your money out when you need it.

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No-Fee Checking Account

Once you retire, you’re likely to notice that the amount of financial transactions you make will go down. While this is not true in all cases, most retirees have simpler financial lives than when they were working. However, you’re still going to need to write checks and/or pay bills on a regular basis, even in retirement. You’ll also need an account to accept income distributions from your investments and deposits from Social Security.

The best option to meet these needs is a no-fee checking account. This is especially true if you’re retired, as you’ll want to keep costs as low as possible once you are living off a fixed income. While more expensive accounts might come with additional bells and whistles, such as international bank transfers or unlimited check writing, they may not be services you’re likely to use once you’re retired.

Even if you do need some more advanced services, you’re likely to be able to find a no-fee checking account that offers them if you shop around.

Short-Term Investment Account

A short-term investment account can be the perfect complement to your trio of retirement, savings and checking accounts. If you don’t need all of your cash 100% liquid and can tie some of it up for a few months, you may be able to earn a higher return on it than even with a high-yield savings account.

For example, you might want to put some of that excess cash into a three- or six-month Treasury bill, or perhaps a certificate of deposit that matures in a few months or even a full year. This allows you to earn a potentially higher rate of return and may even help you from spending it on discretionary purchases, as those types of investments are not quite as liquid as a savings account.

If you sell a Treasury bill, for example, you’ll have to wait at least one business day before the funds are available, and a bank will usually charge you a few days, weeks or months of interest if you sell a CD before its maturity date. But those tradeoffs can be worth it in exchange for a higher yield, if you’re using money you don’t need right away.

The Bottom Line

Every retiree has their own unique financial needs, and these accounts may not be enough to meet everyone’s financial needs. But retirement accounts, Social Security, a short-term investment account and checking and savings accounts should cover the basics for every retiree.

As financial services is a competitive industry, be sure to shop around and find the accounts with the right features and benefits to meet your needs. Then, pick the ones that have the lowest possible costs.

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This article originally appeared on Secure Your Golden Years: 3 Accounts Every Retiree Needs Besides a 401(k) and IRA

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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