Savings Tips

What Retirees Should Know About Direct Deposit

Cameron Huddleston
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Cameron Huddleston
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May 20, 2022
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What Retirees Should Know About Direct Deposit

If you’re not already receiving all of your retirement income by direct deposit, it’s time to consider making the switch to electronic payments. Why? Direct deposit is faster, more convenient and safer—yes, safer—than checks sent in the mail.

It’s understandable, though, if you’re on the fence about using this payment. If you’re not clear on how direct deposit works and what the benefits are, keep reading to learn more about this payment method.

What is direct deposit?

Direct deposit is a payment made directly into a payee’s bank account. A paper check is not issued. Instead, money is electronically transferred from one account to another.

There’s a good chance you received your paychecks by direct deposit before retiring. That’s because  nearly 96% of employees surveyed by the American Payroll Association said they are paid by direct deposit. 

So if you were paid by direct deposit, the process would be similar for electronic payments of retirement income sources. You would need to provide the payer with information about your bank account and authorize direct deposit. Once direct deposit is set up, you’ll start receiving payments directly to your account.

Benefits of direct deposit

It might feel comforting to receive a check, take it to your bank and know that it is being deposited into your account. However, direct deposit is safer, faster and more convenient.

Safe: Money goes directly into your bank account. With checks, there’s a risk that they will be lost or stolen from your mailbox or from your home by a household worker or even a family member. If you’re concerned about whether a direct deposit has been credited to your account, you could sign up on your account to receive a text or email alert when deposits are made.

Fast: With direct deposit, funds will be available sooner in your account than if you deposit a check and have to wait for it to clear. Plus, direct deposits are much more likely to arrive on time than checks. According to the federal government’s Pension Benefit Guaranty Association, more than one in every 200 paper checks is delayed (often because of postal issues) versus fewer than one in every 4,000 electronic deposit payments is delayed. 

Convenient: You won’t have to take the time to go to the bank to deposit checks. The money will be automatically deposited, and you don’t have to lift a finger (or get in your car, wait in line at the bank, etc.). Plus, if you’re out of town when a payment is sent, you won’t have to wait until you get home to deposit it. With direct deposit, the money will be in your account and ready to use.

Who offers direct deposit

Most likely, you’ll be able to receive any and all sources of retirement income by direct deposit. The following provide electronic payments:

Social Security Administration: Actually, you don’t have a choice about how you receive Social Security benefits. Federal law requires that federal benefit payments must be made electronically. Only in rare cases are waivers to this requirement granted. You can create a my Social Security account to set up or change direct deposit.

Department of Veterans Affairs. VA pension payments and disability compensation can be paid through direct deposit. Payment information can be updated by visiting a regional office, calling 800-827-1000 or logging on to your VA.gov profile.

Pension plans: Most pension plans, including federal and state government plans, offer the option to receive pension payments by direct deposit. Contact your pension provider for details.

Retirement plans: Companies that administer IRAs and other retirement accounts typically offer electronic funds transfer so that withdrawals can be directly deposited into a bank account. 

IRS: You can opt on your tax return to have your refund directly deposited into a bank account. In fact, the IRS encourages it because it’s the safest and fastest way to receive a refund.

How to set up direct deposit

For starters, you need a bank account to take advantage of direct deposit. Then you’ll need to take these steps:

  • Visit the website of the company or agency from which you want to receive direct deposit or call to get the form you will need to set up electronic payments. You’ll likely have the option to fill out the form online or to fill out a paper form and mail it in.
  • You’ll be asked to provide your bank information, including the name and possibly the address of your bank, the type of account, and your account routing number and account number. You can find your nine-digit routing number in the left hand corner of your paper checks. The account number will be listed on your checks beside the routing number as well as on your online bank statements.
  • Confirm the deposit amount. You might have the option to deposit payments into more than one account, so you’ll need to specify how much will be deposited into each account.
  • Provide a voided check, if requested. To do this, write “void” across the front of a check then include it with your direct deposit from. You might be able to take a picture of it if you’re filling out an online form.
  • Submit the form. Submitting it online will ensure that it won’t be intercepted by anyone else. If you mail the form, put it in a blue postal collection box inside a post office shortly before pickup time. Do not put it in your residential mailbox, where it can be stolen.


Once the form has been processed and direct deposit has been set up, you should start receiving payments electronically. However, in some cases, it might take one or two pay periods before the switch from checks to direct deposit occurs.

[ Keep Reading: How to Automate Your Finances ]

Cameron Huddleston

Cameron Huddleston

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