Is Putting Money in a Shoebox the Best Way to Save for Retirement?

Although most people do not keep large amounts of money in their homes, some still do. Shutterstock

There was a time when people would regularly save money at home. Although most people do not keep large amounts of money in their homes in a shoebox, some still do. It is most likely to be seniors who either lived through the Great Depression or had parents who did.

Many banks collapsed during the depression, and people knew that they did. It quickly caused people to distrust banks or similar financial institutions. Those who lived during that time started hiding money at home, hoping others in their household would not find it.

Soon, all sorts of hiding places would have cash stuffed in them—in shoeboxes, books, furniture, cookie jars, and anywhere else someone would not think to look. Although many people are not saving money in a shoebox today, GoBankingRates says that as many as 25 percent of Americans still do, which means their savings are at risk.

After the saver dies, it can create a problem. Siblings, relatives, and beneficiaries cleaning out the house may accidentally throw money away because they never thought to look at the object carefully. They just wanted to clean the house to get it ready to sell or hoped to move in themselves.

Another potential problem is if you have had money hidden away in your home for many years, you may forget about it. Once you become a senior, many people do not recall well—and it often worsens as you get older.

Putting Money in a Shoebox Is Not a Good Idea

Anyone who wants to save money can be commended, but that is where it ends. Banks are much safer now, and any money in a bank up to $250,000 is guaranteed to be protected. If the bank or credit union is insured by the Federal Deposit Insurance Corp. (FDIC) (although not every bank is) and it gets robbed or the building destroyed, you will have your money returned rather quickly (up tp $250,000).

Having your money in a shoebox at home does not protect it from anything—even if well hidden. Your home could be destroyed by fire, windstorm, flood, mudslide, earthquake, etc. If that happens, you have no way to get your money back. It is gone—along with any hopes for a vacation or retirement.

Homeowner’s Insurance Does Not Cover It

Even if you have an excellent homeowner’s insurance policy, it will not cover your loss. DavidsOnCap says that even with a personal belongings rider on your policy, the limit for covering cash losses is only $200.

A Better Way to Plan for Retirement

Planning for retirement can be done in a much safer way. Some retirement-planning methods involve some risk, but there are ways to eliminate the risk and ensure that your money will be there when needed. Getting the best ideas on how to save money for retirement will come from professional financial advisors.

Interest Can More Than Double Your Money

The way to build serious money for retirement is to put it in various accounts that earn interest. Two of the most common ways are to use retirement accounts offered by an employer, a traditional IRA, and a 401(k). Some employers will even match your contributions up to a certain amount.

Depending on how soon you start saving money for retirement, you can earn more than twice as much as you put into it by the time you retire. You cannot do this by keeping your money in a shoebox. Using readily available methods of saving money can give you a much more comfortable retirement than you could ever have by cash stuffing.

Typical savings accounts at most banks only offer less than 1 percent interest. Some banks, particularly online banks, offer much more—some giving as much as 6 percent interest. At that rate of interest, it would take 12 years to double your initial investment. If you left it there for 36 years and the interest rate stays the same, you would have more than three times your initial investment.

Employers Retirement Accounts

When opening a retirement account with an employer, make regular monthly contributions, enabling you to earn much more. Although you must pay taxes on a regular savings account, retirement plans such as an IRA or 401(k) make paying taxes unnecessary until you retire.

These two retirement accounts continue to grow, and you will only get a tax bill once you retire and start making withdrawals. You will likely earn less by then, so your taxes will be lower. The only exception is if you withdraw money before you are 59½ years old.

Employers’ retirement accounts often enable you to choose investments within the account that will let you earn money faster. The stock market determines the interest rate, causing it to fluctuate.

Health Savings Accounts

One way that you can save money on your healthcare costs is to get a health savings account (HSA). These accounts require having a high-deductible health policy (HDHP). Money put into these accounts is tax-deductible and continues to grow tax-free until withdrawn in retirement. All money used for medical costs is tax-free.

High-Yield Money Market Funds

Besides the above methods, you can also invest in high-yield money market funds. These have a higher interest rate, but they come with some risks. You can choose a risk level to meet your needs.

Saving money securely will help you rest easier at night. You will not have to worry anymore about being robbed or having a fire. You can do much better than putting money in a shoebox or other hiding place. Talk to a financial advisor to find the best ways to save money and build your savings for a more comfortable retirement.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.