Why Mutual Banks Make Sense

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By Jorge Santiago

Mutual banks have been around since the early 1800s.  There are currently about 470 in business across the country and nearly all of them are also classified by the FDIC as community banks.  They were initially created to provide savings opportunities to the working class, something they couldn’t easily get from commercial banks that focused on business customers.  Mutual banks offered individuals a safe place to deposit funds and earn interest, with a tradition of providing quality service to their customers.  Those values remain core to mutual banks today, which lead to several benefits that are passed on to customers.

Corporate Structure

The basic idea behind mutual banks is they are not controlled by stockholders or other direct owners.  Rather, their customers – the depositors that bank with them – are considered mutual owners.  As a result, mutual banks don’t make decisions based on shareholder interests, but focus on how they can deliver maximum value to their customers and support the communities they serve.

Customer Security

Nearly all mutual banks – like The Milford Bank – are insured by the FDIC, and on average, mutual banks have a Tier 1 capital ratio (an indicator of capital security) well above the minimum level and are considered “well capitalized” by the FDIC.  In addition, mutual banks are traditionally conservative when it comes to investments and spending, looking for safe opportunities and avoiding high-risk investments.  It’s one of the reasons mutual banks were almost the only banks that successfully navigated the Great Depression and why they continue to provide a safe banking option today.

Customer Service

Mutual banks have a longstanding reputation for quality service that stems from their focus on depositor value rather than corporate ownership.  Because customers are viewed as owners, serving their needs and delivering a high level of personalized service is their top priority – including a broad service portfolio, convenience, local access, and banking expertise.

Product Breadth

Today, mutual banks offer most of the same services private customers can get from larger commercial banks.  They are investing in digital banking technologies to make banking easier and more convenient, including tools to encourage saving.  They have knowledgeable local staff ready to provide valuable banking information and advice to help customers make responsible financial decisions.

Commitment to Community

Mutual banks are localized, which means they have a vested interest in their local communities.  Not only do their employees live and work in those communities, but so do their customers.  As a result, mutual banks tend to be very active in their communities.  Many offer special events in their towns – like The Milford Bank’s annual Shred & Recycle Days and the Milford Moves 5k – and regularly support local organizations and businesses through a number of initiatives.  Mutual banks espouse community values that reflect their dedication to their customers.  The Milford Bank, for instance, supports more than 100 local organizations throughout the year with not only financial support, but also time dedicated by its team to help these community groups.

When deciding where to put your money for safekeeping, you have options.  By nature, mutual banks can offer benefits that many larger corporate financial institutions cannot.  If you want to know exactly how you local mutual bank can support your banking needs, give them a call or go visit one of their offices for some firsthand detail.  Ultimately, the most important factor is that your money is safe and you have access to the services and expertise you need, when you need it.  As a client, that’s the commitment you’ll get from mutual banks.

Are You Prepared to Retire Early?

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Early retirement has always been a dream for many Americans, yet most have not been able to achieve that goal.  Prior to the COVID-19 pandemic, 46% of retirees said they ended up retiring earlier than expected due primarily to four factors:  health conditions, emotional status, financial readiness, or job loss.  That means, while many were hoping to retire early, others were forced into it due to unforeseen circumstances.

Likewise, 43% of today’s largest segment of the workforce – the Millennial generation – is expecting to retire early.  But, more recent data suggests that, due to the pandemic, that number has grown even higher, with 20% of the total workforce, including 15% of Millennials, saying current conditions have accelerated their retirement plans.

The question is, can they afford to retire early?  Some people will have a very hard time if they are pushed into early retirement, while others may have been able to plan ahead and, even if they weren’t planning on retiring early, will be able to live comfortably.  Here are some things to consider as you plan for retirement, regardless of your current age.

Invest – Despite the fact that the stock market has been extremely volatile this year, consider investing.  Whether you are just entering the workforce or nearing standard retirement age, maximizing your retirement investments may help you when you do retire.  That includes your 401k or IRA contributions.  But, you should do it wisely and adjust your allocations based on your current and expected circumstances to maximize your retirement funds.  Be sure to speak with a financial expert who can help you make choices that are best for you.

Social Security – The amount of social security benefits you receive is dependent upon when you claim benefits.   The longer you wait, the more you’ll receive.  Waiting until full retirement age (65-67 years, depending on birth year) will mean your benefits can be almost a third higher than if you take them at an earlier age.  Similarly, if you retire late (or at least wait to start claiming your SSA benefits), you stand to get almost a third more than at standard retirement age.  If you can afford to live comfortably without it, waiting to claim your benefits may be an advantage later in life.

Understand retirement – Perhaps the most important part of planning for retirement is knowing what you’ll need to live comfortably.  That includes what you plan to do once you retire, what your other sources of income may be, what your expenses will be, and other factors.  Retirement planning can also impact where you retire:  A significant portion of Americans today are looking to retire in other countries with lower costs of living. Remember, if you plan on early retirement, you’ll need more savings because you’ll be living off your retirement income for longer, and don’t forget to factor in healthcare costs, inflation, and changes to expenses as you age.

Pay off debt – If you have existing debt, try to pay it down before you decide to retire.  Massive debt can impact your retirement lifestyle.

Build your emergency fund – It’s always good to have an emergency fund that can cover several three to six months worth of expenses should an emergency arise.  This is particularly important when you retire, so you won’t have to dip into your retirement savings to cover unexpected costs.

Evaluate your current spending – If you are looking to put more into your retirement savings, the easiest way is to reduce your current spending.  If you need help saving, there are some great digital tools that can help you put away extra income, which you can put towards retirement.

It can be hard to plan far into the future, especially when it involves a dramatic change like no longer working.  But, by taking the steps today and being aware of some of the factors that can impact your retirement income, you can set yourself up more comfortably.  If you need advice on saving, retirement plans, or other ways to make sure you have enough saved, your bank’s financial experts are ready to help.