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Retirement Hacks: What to do with your cash if you’re retired or retiring soon

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The saying goes, “cash is king,” but having a plan for how to make the most of it during a high-inflation environment is still the best strategy – especially for retirees and near-retirees. 

Read: Inflation is hijacking retirement savings

Retirement Tip of the Week: If you’re sitting on a lot of cash these days, consider spreading some of it out to make the most of your future retirement income. 

For many older Americans, banks are a safe place to keep assets. But for years they’ve come with very low interest rates, meaning your money is barely earning anything while it’s parked there. The Federal Reserve has been steadily increasing the federal-fund rate throughout the year, which does impact the interest rates banks and credit lenders use, but it will still amount to barely a budge for savings accounts. 

Read: IRS increases 401(k) limits — investors can save a lot more money in 2023

“Near-retirees should be getting the most on their savings, and traditional bank savings accounts are decidedly low,” said Jeremy Keil, a certified financial planner at Keil Financial Partners. 

See: ‘A plan to protect any excess cash is vital.’ As inflation sits at a 40-year high, here’s who has ‘too much’ in savings right now

There are also CDs and money market accounts, said Michael Wren, a certified financial planner and chief executive officer of Legacy Financial Strategies. The rates for both of these options are reaching rates they haven’t reached in “over 15 years,” he said, “so we’ve had to nudge clients with large cash holdings to take advantage.” 

And while these accounts may not be beating inflation rates, they’re still more lucrative than savings accounts that have rates of less than a percentage point, said Devin Pope, a certified financial planner with Albion Financial Group. “For larger balances, that can add up to a lot of money.” 

Better alternatives to a traditional bank account include I-bonds, which are inflation-adjusted, Treasury bills and online savings accounts, Keill said. Those unfamiliar with these investment options should consider working with a financial adviser or consulting a qualified professional at the investment firm managing their retirement assets. 

Also see: I-bonds offer mouthwatering yields – but there are some arbitrage opportunities available to investors as well

This isn’t to say individuals shouldn’t have any cash easily available. Americans should still have emergency funds worth at least three to six months’ of their living expenses (or perhaps even a year’s worth if they’re retired), as well as money on hand for short-term expenses they expect to have. 

Read: More seniors are being pushed into poverty — here’s why

The current economic environment may be a stressful time, especially those approaching their retirement (or already in their retirement years) but there’s still plenty they can do, advisers said. 

“Inflation takes a toll on savers, but it doesn’t have to prove deadly if clients position their cash shrewdly,” Wren said.

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