5 ways retirees can better manage their savings

For retirees who have accumulated sufficient savings to meet their retirement needs and don’t want to take any risk with some or all of their money, deposit accounts can be a great option. Unlike stocks and bonds, deposit accounts are protected by federal deposit insurance.

In today’s very low interest rate environment, it’s a challenge to find yields on deposit accounts that are high enough to generate an income. However, savvy retirees can take advantage of today’s banking environment to generate much higher income from deposit accounts than what has been possible from the old way of banking. Here are five ways:

1. Move your short-term money into a high-yield reward checking account

High-yield reward checking offers interest rates up to 5%. That rate is much higher than any long-term CD that’s currently available. Two important caveats of reward checking should be understood, however. First, reward checking requires monthly account activity, typically including debit card purchases, to qualify for the high rates. Second, all reward checking accounts cap the balance that earns the high rate. The caps typically range from as low as $5,000 up to $50,000.

2. Move additional short-term money into an internet savings account

Retirees will likely have savings that exceed the balance cap of a reward checking account. For short-term money that exceeds the amount that can be practically maintained in reward checking accounts, internet savings accounts can offer interest rates much higher than what’s available at brick-and-mortar banks and credit unions.

3. Move longer-term money into top-rate 5-year CDs with mild early withdrawal penalties

For savings that are not needed for near-term expenses, CDs with maturities of 5 years offer the best opportunity of yields that are higher than savings accounts. Though CDs ostensibly require locking the money away for a fixed term, one technique that can mitigate the loss of access to the money is the use of CDs with mild early withdrawal penalties. Look for 5-year CDs with early withdrawal penalties of no more than six months of interest.

4. Look for the best rates on CDs at internet banks and credit unions

The two best places to find top CD rates are internet banks and credit unions. Credit unions often have the best rates. Retirees may not realize how many credit unions they are eligible to join. Not only are there often local credit unions which are easy to join, many larger credit unions have made it easy for people in any part of the country to join. This typically requires joining the credit union and opening accounts online using the credit union’s website.

5. Choose the right mix of reward checking accounts, savings accounts and CDs

Savings accounts offer easy access and low effort, but the lowest yield of the three products. Reward checking accounts offer the highest yield, but they require the most effort. CDs lack fund accessibility. Retirees must decide the right mix of reward checking accounts, savings accounts and CDs based on how much yield they want and their desired levels of accessibility and effort.

Ken Tumin is founder and editor of DepositAccounts.com, which has been tracking and rating the savings, CD and checking account offerings of banks and credit unions for more than a decade.