With the stock market in the doldrums, and a flurry of bank failures and subsequent Federal bank bailouts, increasing numbers of retirement savers are choosing credit unions for their individual retirement accounts (IRAs).
IRA balances at credit unions are up 12 percent over the past year, according to the Credit Union National Association (CUNA). Now totaling $75 billion, IRA accounts have quietly climbed to almost ten percent of all credit union deposits.
Due to job loss, choosing to bypass employer-sponsored 401(k) plans or simply retiring, Americans are increasingly moving their retirement savings to IRAs. A study by Cogent Research revealed that for the first time IRA assets are now greater than employer-based accounts like 401(k)s and 403(b)s. Credit unions are providing both a secure place for retirement accounts and real cost savings in the form lower fees and better rates.
About half the nation’s 8,000 credit unions now offer IRAs. Accounts in federally insured credit unions are insured up to $250,000. Insurance is through the National Credit Union Share Insurance Fund (NCUSIF), administered by the National Credit Union Administration (NCUA).
Stan Hollen, President/CEO of CO-OP Financial Services, observes: “IRAs are in sync with credit union ideals, like member education and financial planning. Credit union members have never lost a nickel of their insured funds in the history of NCUSIF.”
Credit unions also improve their members’ retirement through actual cost savings. Because of their not-for-profit structures, credit unions are exempted from most state and federal taxes. This allows credit unions to offer their members lower loan rates, higher savings rates and fewer service fees than most banks.
Most credit unions still offer free checking, and their penalties for overdrawing those accounts tend to be lower. The majority of credit unions also have no balance requirement on their checking accounts and allow unlimited monthly transactions, feeless debit card transactions and no minimum opening balance on their free checking accounts. According to a study by Pew Charitable Trusts, interest rates on credit union credit cards are 20 percent lower than bank cards. Information on where you can locate a credit union can be found at www.co-opfs.org (“locators” on top menu bar).
“Part of a solid retirement plan involves making sure that your savings are there when you need them, and making your money last,” said Hollen. “A disciplined, slow and steady approach is best, combined with insured safety and not spending unnecessarily. Member-owned credit unions, with their heritage of service, trust and security, are right in tune with today’s savers and retirees.”