Experts: Banking Habits You Should Change in Retirement
While retirement is often a time when you finally get to stop thinking so hard about many of the little details in life, there are some you want to stay on top of, like your banking habits.
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Some of your pre-retirement banking habits may not be as useful, protective or financially savvy after retirement.
Experts explain some banking habits you might still be doing that you’ll want to change in retirement.
Not Saving More Than Before
Retirees should consider having more money in a bank account than they did while they were working and earning an income, according to Chris Urban, CFP, a retirement planner and founder of Discovery Wealth Planning.
“These days, high-yield savings accounts are a good place to earn a reasonable amount of interest while also having access to your cash. These accounts are a great way to insulate your household from the ups and downs of the financial markets, where your other retirement and investment accounts may be invested,” Urban said.
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Not Keeping Cash Liquid
Consider taking your spending money from this high-yield savings account and replenishing it in a tax-efficient way from your retirement and/or investment accounts in years when they have performed well, Urban explained.
“Sure, you might have what is referred to as ‘cash drag’ by holding too much in cash; however, in my opinion, retirement is much more about optimizing your overall happiness and life than it is about optimizing for investment performance,” he said.
Holding On to High-Fee Accounts
Retirees should steer clear of accounts with high fees, including maintenance fees, overdraft fees and ATM fees, according to Taylor Kovar, CFP, founder and CEO of 11 Financial.
“These fees can eat into retirement savings over time. Instead, consider switching to fee-free or low-fee accounts to minimize expenses and maximize savings,” he said.
Do your research and shop around different banks and credit unions to find accounts with low or no fees, added Lyle D. Solomon, Esq., an attorney who specializes in personal finance issues such as debt relief, taxes and estate planning at Oak View Law Group. “Don’t hesitate to switch if you find a much better deal elsewhere,” he said.
Using Non-Bank ATMs
Retirees should also be mindful of using non-bank ATMs, which often charge hefty fees for withdrawals, Kovar said.
“Instead, opt for ATMs affiliated with your bank or credit union to avoid unnecessary charges. Additionally, consider withdrawing larger sums less frequently to minimize the number of ATM transactions and associated fees,” he explained.
Keeping Too Many Accounts Open
Retirees may have accumulated multiple bank accounts over the years, leading to unnecessary complications and potential fees, Kovar said.
“Consider consolidating accounts when possible to reduce any complexity. This can also help retirees better track their finances in fewer accounts,” he said.
Not Adapting To Mobile Banking
If you haven’t already adapted to mobile banking, now is the time, according to Solomon.
“Going digital with online and mobile banking can help you better manage your finances too,” he explained. “Lots of banks offer free online bill pay now to save you money on stamps and checks. Keeping a close watch on your accounts online also helps you catch any fraudulent charges right away before they become bigger headaches.”
Not Reviewing Your Credit Card Habits
It’s also smart to look at your credit card habits, Solomon said.
“While plastic can be convenient and offer rewards, it also enables overspending and racking up high-interest debt fast,” he explained. “Consider using cash or debit cards for most everyday stuff and only use credit cards for emergencies or bigger purchases you can pay off immediately.”
Not Asking For Discounts
Additionally, don’t be shy about asking for senior discounts or promotions, Solomon suggested. “Plenty of banks offer special accounts and perks for retirees like waived fees, higher interest rates on savings or even free financial advice sessions. Take full advantage of anything that helps stretch those retirement dollars further.”
Not Monitoring Your Accounts Regularly
If you aren’t paying close attention to your accounts, you may be missing out on fraud or accruing overdraft charges, which can get expensive, according to Reagan Bonlie, the founder of Nudge Money and former wealth management executive with J.P. Morgan.
“Keeping an eye on your accounts helps you spot any unauthorized transactions quickly and allows you to manage your budget more effectively,” he said.
Not Automating Deposits or Bill Payment
If you haven’t set up direct deposit for any regular income, such as Social Security payments, you might find yourself in a pinch or forced to withdraw from a retirement account when you didn’t intend, according to Bonlie.
“[Automating deposits] ensures your money is deposited quickly and safely,” he said.
Similarly, automating your bill payments can help you avoid late fees and ensure your bills are paid on time.
Just staying proactive and making some small adjustments to your banking routines can ensure your savings last longer and provide more financial peace of mind through your golden years.
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