The 3 Best Places for Retirees to Keep Their Savings

The average baby boomer in 2024 has $120,300 in retirement savings, according to Northwestern Mutual. Ideally, though, you'll be entering your senior years with more savings than that.

It's important to find the right home for your retirement savings so you have access to cash when you need it, but also have a way to continue growing your wealth as a senior. With that in mind, here are three options for your retirement savings to strongly consider in conjunction with one another.

1. Savings accounts

Workers are advised to maintain an emergency fund at all times for unplanned expenses, like home or car repairs, as well as for periods of unemployment. As a retiree, you clearly don't have to worry about the latter since you're past the days of reporting to a job. But you might still encounter your fair share of unexpected bills. For this reason, it's important to keep some of your nest egg in a regular savings account.

These days, that's not such a raw deal, because savings accounts are paying pretty generously. In time, that could change, and interest rates may drop substantially so you're not earning very much on the money you keep in the bank. But even so, it's important to have easy access to cash at all times, and a savings account gives you exactly that.

2. CDs

During retirement, it's important to do what you can to grow your savings further while minimizing your risk. People in their 20s and 30s can often afford to put the bulk of their savings into the stock market because they have decades to ride out downturns. As a retiree needing to live off of your savings, you no longer have that luxury.

That's why it's a good idea to keep some of your retirement savings in cash. This way, if the stock market tanks during your retirement, you'll be able to sit tight and avoid liquidating investments at a time when their value has dropped.

But when it comes to maintaining cash savings, you have options beyond a regular savings account. You could also open a CD and keep some of your money there.

CD rates tend to be higher than savings account rates. And more so than that, CDs can serve as a predictable source of income for you in retirement because the rate you lock in when you open one is the rate you're guaranteed until the account term expires.

If you're going to keep some of your retirement savings in a CD, though, set up a ladder so you have cash freeing up at various intervals. In fact, if you know there's a good chance that you'll need to live off of that cash, you may want to set up a CD ladder that has a CD maturing every month, or every other month.

3. Roth IRAs or Roth 401(k)s

While it's a good idea to not go too heavy on stock investments in retirement, you should still maintain a stock portfolio so your nest egg continues to grow. A Roth IRA or Roth 401(k) may be your best place to house those investments.

Both Roth IRAs and Roth 401(k)s give you the benefit of tax-free withdrawals. At a time when your income may be lower than what it was during your career due to not working, that's an important thing.

Plus, the money you keep invested in a Roth IRA or Roth 401(k) can continue to grow tax-free during your retirement. And while you may need that money to live on, if you don't, you can let it sit and continue growing indefinitely. Unlike traditional IRAs or 401(k)s, Roth accounts do not impose required minimum distributions.

Ultimately, it's a smart idea to have your retirement savings in different assets. With cash, you don't run the risk of a market event impacting the value of your money. With stocks, you take on risk, but you might enjoy larger gains that ultimately give you more spending power. If you divide your retirement savings up between a savings account, CDs, and a Roth IRA or Roth 401(k), you can set yourself up with the best of all worlds.