Include a High-Yield Savings Account in Your Retirement Planning Strategy

Tax-advantaged accounts like 401(k)s and IRAs may form the backbone of your retirement plan, but adding a high-yield savings account can strengthen your financial security as you prepare for your golden years. High-yield savings accounts are often overlooked as retirement planning tools but offer unique benefits that complement traditional retirement vehicles and provide flexibility.

Of all the things people save for, retirement is almost universally valued. More than nine in 10 (91%) of respondents to Forbright Bank’s 2025 customer survey said they believe retirement is worth saving for.

Keep reading to learn how a high-yield savings account can help you meet retirement savings goals.

Retirement planning isn’t just about maximizing long-term growth. It’s also about creating financial resilience. A high-yield savings account transforms the traditional emergency fund into a strategic retirement asset. Unlike traditional savings accounts that offer minimal interest, high-yield savings accounts provide competitive interest rates, allowing your emergency funds to work harder while remaining completely accessible when you need them.

This liquidity serves as a safeguard for your retirement portfolio. When unexpected expenses arise, such as a major home repair, medical bill, or family emergency, having accessible cash means you won’t need to tap into retirement accounts prematurely. And with certain accounts, like Growth Savings, you can make unlimited, automated transfers to and from the account with no fees.

One of the most compelling reasons to incorporate a high-yield savings account into your retirement strategy is to avoid early withdrawal penalties from tax-advantaged accounts. The IRS imposes a 10% penalty (plus taxes) on withdrawals from most retirement accounts before you reach age 59.5, which can significantly erode your hard-earned savings.

Imagine you’re 57 and face an unexpected $10,000 expense. Without liquid savings, withdrawing from your traditional IRA would cost you $1,000 in penalties plus taxes on the distribution. If you have a high-yield savings account, you can tap into it for the funds you need while preserving both your principal and the compound growth potential of your retirement accounts.

High-yield savings accounts are particularly helpful during the transition to retirement. Many retirees face a gap between when they stop working and once they start collecting Social Security or distributions from retirement accounts. A well-funded high-yield savings account can serve as a helpful income bridge during this period.

Depending on the amount saved in your high-yield savings account, you may be able to delay Social Security benefits up to age 70, increasing your monthly payment by up to 8% for each year you postpone in claiming it.

Market downturns can be particularly devastating when they occur early in retirement. That’s because retirees may not have time to wait for the market to recover before they must start taking withdrawals from their investment accounts. This phenomenon is known as sequence-of-returns risk. However, if you have significant assets in a high-yield savings account, you may be able to avoid selling investments at lower prices to fund living expenses.

During market corrections, you can draw from your high-yield savings account instead of liquidating stocks or bonds, giving your portfolio time to make up for any temporary losses. This simple strategy can dramatically improve the longevity of your retirement savings.

Beyond the mathematical advantages, there are psychological benefits to maintaining liquid assets in retirement. Market volatility can trigger anxiety and poor financial decisions. If you have accessible funds in a high-yield savings account, that can provide peace of mind and reduce the likelihood of panic-selling investments during market downturns.

It’s wise to maintain three to six months’ worth of expenses in an emergency fund, but for retirees, financial experts often recommend stashing 18 to 24 months of living expenses in a high-yield savings account. This approach balances liquidity needs with growth potential for the rest of your portfolio.

As you approach retirement, consider making a plan to shift a portion of your investments into your high-yield savings account to create this buffer, while allowing the remaining amount in your portfolio to replenish those gains over time. The bottom line is that by integrating a high-yield savings account into your retirement planning, you can create flexibility, protection, and strategic advantages that enhance the overall strength and resilience of your financial future.

Disclaimer: This article is for general information and education only. It should not be considered financial or tax advice.