For many of us, planning for retirement can be overwhelming and confusing. How much should you save? And how should you do it? And how much can you withdraw? And when? There are so many questions.
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But here’s a secret: Your local bank could be the key to securing your financial future. GOBankingRate spoke with financial experts to find out how you can make your bank work for you and your retirement savings. Here’s how you can use your bank’s retirement accounts to secure your future.
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The facts about retirement savings accounts at banks
What exactly is a retirement account? Thomas J. Brock, CFA, CPA and expert at RetireGuide, broke it down for us:
“Traditional bank retirement accounts allow for tax-free investment growth and upfront tax deductions, while Roth-style bank retirement accounts allow for tax-free investment growth.”
In plain English? You have options. You can either postpone paying taxes with a traditional account or bite the bullet now and enjoy tax-free withdrawals later with a Roth.
And here’s the rub: bank retirement accounts tend to be safer than their broker counterparts. As Brock put it:
“Bank retirement accounts have more limited investment options than brokerage-based retirement accounts. The former offer low-risk products such as certificates of deposit and savings accounts. The latter offer a range of investment options, including stocks, bonds, mutual funds and exchange-traded funds.”
Although you are not on the rollercoaster ride of the stock market, market fluctuations cause you fewer sleepless nights.
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How to make your bank’s retirement accounts work overtime
Here’s how you can make the most of these bank retirement accounts.
Take advantage of the tax benefits
Erika Kullberg, attorney and personal finance expert at Erika.com, cannot stress this enough:
“In my experience, one of the most effective ways to build and improve your financial future is to make full use of retirement accounts such as IRAs or 401(k) plans. These accounts offer great tax advantages that can help your savings grow significantly over time, which can give you a huge confidence boost as you progress through your career.”
Think of it as the government giving you a pat on the back for saving money. Who doesn’t like that?
Set and forget
Andrew Latham, a CFP at SuperMoney.com, pointed out a game-changing benefit.
“Banks can make retirement planning much easier by allowing you to automate your savings and manage all of your finances in one place,” he explained. “When your retirement accounts are linked to your checking or savings account, automating deposits becomes a breeze. This allows you to stay on top of your savings goals without having to deal with managing multiple platforms.”
Essentially, it’s like having a personal finance guru walk you through the steps – you don’t even notice.
Don’t put all your eggs in one basket
Even though the options are limited, you can add variety.
“Another great strategy is to diversify your retirement accounts by investing in different types of investments, such as stocks, bonds and mutual funds, and to hedge your bets,” Kullberg said. “This way, you can both reduce risk and maximize the growth of your investments.”
Think of it like making a financial smoothie – a little bit of everything for a balanced mix.
Consider the Roth Route
Matt Willer, managing director of capital markets and partner at Phoenix Capital Group, said people should take advantage of the benefits of Roth IRAs. He explained that with a Roth IRA, the interest earned is tax-free, just like with a CD.
To break it down, when you put money into a Roth IRA, it grows tax-free. This means any interest you earn over time isn’t taxed, and when you withdraw the money in retirement, you don’t have to pay taxes on it either. This way, you can maximize your savings by keeping more of what you earn over the long term.
One-stop shop for your money
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“While not all banks offer the extensive investment options available through brokers or independent advisors, the best banks have their own brokerage or investment advisory branches,” Latham said. “For example, JP Morgan of Chase, Merrill Lynch of Bank of America and Wells Fargo Advisors combine the convenience of traditional banking with the sophisticated investment options typically found at specialized brokers.”
All your money is in one place, making it easier to manage today and in the future.
Don’t leave money on the table
You must be consistent with your contributions.
“Regular contributions to these accounts, especially when combined with matching employer contributions, can provide a solid foundation for your retirement savings,” Kulberg said.
If your employer offers a 401(k) match, be sure to take advantage of it. It’s essentially free money.
Stay alert and ask for help
While bank retirement accounts are great, they are not the only option. Latham shared:
“However, it is hard to beat the low costs and wide product selection of large platforms such as Vanguard and Fidelity, which continue to be a popular choice among many investors.”
Don’t be afraid to ask for help. A good financial advisor can be worth its weight in gold (or your retirement savings).
The last word
Your bank’s retirement accounts can be your secret weapon for a comfortable retirement. By making the most of tax benefits, automating your savings, diversifying your investments, and staying current, you’ll prepare for a future where financial worries are a thing of the past. Remember, it’s not about getting rich quick, it’s about building a solid foundation for your future, one deposit at a time. So what are you waiting for? Your future self will thank you for starting today.
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This article originally appeared on GOBankingRates.com: I’m a Banking Expert: How to Use Your Bank’s Retirement Accounts to Secure Your Future
