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Planning For Your Retirement With Certificate of Deposits

The importance of saving for retirement is stressed throughout our lives. Most people value employment opportunities that offer 401k retirement accounts, particularly those who are lucky enough to have their contributions matched by their employers. In addition to 401k accounts, or for individuals who don't have the option for 401k plans, the IRA is a very popular method of saving for retirement.

What many people don't consider are the benefits of using Certificate of Deposits (CDs) as a way to save for retirement. Much like traditional savings accounts or your 401k - Certificate of Deposits offer a very low risk investment for people who save over a longer period of time. You can open a CD with almost any amount of money, and the longer you keep your money in the CD, the higher your interest rate will be. You select your savings term when opening the account from the available options – typically between 3 months and 5 years, but it depends on which financial institution you use.

A Certificate of Deposit is the same as loaning the banking institution your money for the term you choose to save for. In exchange for the “loan”, the bank gives CD holders interest. When your Certificate of Deposit reaches it's maturity date, you then have the option to take out the money you've invested and the interest it earned, or to roll it into another CD or other investment. If using Certificate of Deposits as part of your retirement planning strategy, you should consider a ladder strategy of opening CDs of varying maturity dates, or simply reinvesting your money at the end of each CD term until you need it during your retirement years.

Certificate of Deposits are considered a good option for retirement since they are a safe investment. Individuals who are conservative with their money and do not wish to take a chance using higher-risk investments appreciate CDs for their predictable earnings. In particular, people who are approaching retirement age need to be more conservative with their money than someone who is in their 20's. It makes sense to use Certificate of Deposits to hang on to the money they've already invested throughout the years.

For people who are already living out their retired years, Certificate of Deposits are a good way to help your savings earn more. Strategically investing your retirement money into multiple Certificate of Deposits that mature at varying time periods will give you access to a portion of your money each time one of the certificates matures – while the rest continues to earn interest.

Just remember that you can't withdraw the money from a Certificate of Deposit until the specified maturity date without paying a penalty, so you won't want to tie up all of your money in CDs. Take out what you need until your first Certificate matures and you'll never need to pay the penalty to get your money out of the CD.

Certificate of Deposits offer strategic and safe savings for individuals saving for retirement, as well as people who have already reached the Golden Years. You can feel confident that the money you save in a Certificate of Deposit will still be there (plus interest) when it reaches it's maturity date.

  |     |   Comment #2
What a great tip! This is actually a really good strategy for folks like my in-laws who are looking for a decent return on an investment without a lot of risk due to being of retirement age. Thanks for the insights Debbie!

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