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Layin’ It on the Line: Why basic bank accounts are the worst for retirement savings

By Lyle Boss - Special to the Standard-Examiner | Mar 29, 2023

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Lyle Boss

Little better than keeping money under the mattress, the idea that bank accounts are the best way to save for retirement is a myth. In reality, they are one of the worst options out there. By keeping your money in a savings account, you’re missing out on potential earnings and losing purchasing power to inflation. There are much better options available for retirees and future retirees. Keep reading to learn more about why bank accounts are the worst for retirement savings.

The fees associated with bank accounts can eat into your retirement savings, making them a poor vehicle for retirement planning.

When it comes to retirement planning, having a bank account is not always the way to go. While saving money in an account is wise and usually safe, the fees associated with bank accounts can make it very difficult to achieve your retirement goals. Even small fees like maintenance or overdraft fees can add up over time and put a dent in your potential retirement savings. While having money in a bank account might help you know you have some funds available when you need them, other vehicles, such as IRAs or 401(k)s, are typically more ideal for retirement planning.

Bank interest rates are often low, meaning your money doesn’t grow as quickly as it would in a retirement account.

Although bank accounts are safe and secure, the interest rates offered on them are often lower when compared to retirement accounts. Placing your money in a bank account will not reap the same rewards as investing in a retirement account. Those looking to grow their savings should consider other alternatives, such as mutual funds and annuities. With careful planning, you can significantly increase the growth of your savings through higher-yield options — investments that provide better long-term returns than basic banking offers.

There are no tax benefits to having a bank account for retirement savings.

Unfortunately, there is no tax benefit from having a bank account as a retirement savings plan; however, other options are available. It is essential to thoroughly evaluate your options and consider the associated costs and taxes before selecting the best retirement savings vehicle. From IRAs and 401(k)s to annuities and health savings accounts (HSAs), numerous options offer different levels of tax advantages, so be sure to do your research.


All in all, bank accounts aren’t the ideal way to save for retirement. The fees and low-interest rates can impact how quickly your money grows. Talking to a professional retirement planner is a good idea if you’re looking for the best way to save for retirement. They can help you figure out the best way to use your money so that you can comfortably retire when the time comes.

Lyle Boss, a native Utahn, is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. Boss Financial, 955 Chambers St., Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.


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