This Simple Trick Could Increase Your Retirement Income Each Month
Adding a few hundred dollars to your retirement income each month could make a huge difference for your budget. It may allow you to take an extra vacation, sign up for a new membership or enjoy several extra meals out.
And you may be able to do this without much effort if you have a significant amount of cash sitting in a traditional savings account — which tend to offer interest as low as 0.01% — or a checking account, which usually don't offer interest at all. Move that cash to a high-yield savings account to earn significantly more interest.
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The perk of opening a new savings account
As people get closer to retirement age, they tend to move more of their money out of risky assets. But if that money then sits in a traditional savings account or checking account, it’s not earning significant interest.
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Some people stick with the same bank for many years without comparing options or seeing if they could get a higher rate elsewhere. But online banks have gained traction over the past decade, and some of them offer annual percentage yields around 4% or more. That’s a lot more than what you will receive from checking accounts and most savings accounts, especially if you do business with a traditional bank.
Money market accounts are another type of bank account that offer higher yields, but they sometimes come with a minimum balance requirement that you must fulfill to receive the maximum APY and avoid monthly maintenance fees. Always check the rules of a high-yield savings account or money market account before opening one.
Moving your money
If your current bank already has a high-yield savings account, it’s easy to move the money. All you have to do is create a high-yield account then transfer the funds from your checking account or savings account to your new savings account. There, your money will compound faster and generate risk-free returns.
It takes a little more effort to move funds from one bank to another, but the overall idea is similar. You open an account at the new bank, then initiate an online transfer between the two accounts.
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The extra income from a HYSA
A retiree who has $100,000 sitting in a traditional savings account earning a 0.01% APY will only earn $10 in interest in a year. But another retiree with that $100,000 in a high-yield savings account earning a 4% APY will earn $4,000 in a year, or $333 per month.