How savings are key to your retirement

While superannuation and investments often form the backbone of retirement income, a savings account still plays a vital and often underrated role in a well-rounded retirement plan. 

Its purpose isn’t to grow wealth dramatically, but rather to provide safety, liquidity and flexibility – qualities that become increasingly important as your life slows down and income becomes more fixed. 

Let’s break down some of the reasons to maintain a savings account.

A safe haven for emergency funds

Even in retirement, unexpected expenses can arise, whether it’s a medical bill, urgent home repair, or helping a family member in need. 

A savings account offers a secure and easily accessible place to keep emergency funds. Unlike shares or property, which can fluctuate in value or take time to sell, cash in a savings account is ready when it’s needed. 

Experts often recommend having at least three to six months’ worth of living expenses readily available. 

A tool for managing cash flow

In retirement, managing the timing of income becomes crucial. Income from super, the Age Pension, or investments may come in monthly or quarterly instalments. 

A savings account can act as a buffer, helping retirees smooth out cash flow by holding funds until they’re needed. This can be especially useful for covering bills or everyday spending between payments.

Preserving capital for short-term goals

Not all retirement savings are for long-term needs. You might be planning a holiday, new car, or minor renovations. 

For short-term goals like these, where you need the money within a year or two, a savings account is ideal. It keeps your capital intact while offering modest interest and no risk of market downturns. 

Peace of mind

There’s comfort in knowing that some of your money is safely tucked away and not exposed to market volatility. This psychological benefit shouldn’t be underestimated. 

For many retirees, having a portion of their nest egg in a savings account provides reassurance and a greater sense of control over their finances. 

While a savings account won’t deliver high returns, its role in retirement is essential. It complements other retirement income sources by providing security, liquidity, and flexibility. 

By including a savings account in your retirement plan, you’re not just being cautious, you’re being smart. It’s a simple yet effective way to stay financially resilient in your later years.