There are many reasons to put your retirement money in a CD or savings account, but a few stand out as the safest. Fixed-interest accounts, like savings accounts, are the safest, because they don’t directly involve the market and have little risk. On the downside, they also have little growth potential. Listed below are some advantages and disadvantages of each type of retirement account.
When you’re younger, you can afford to take a higher risk portfolio. If you’re still young, you’ll have several decades until you’ll need your funds. You can afford a higher risk allocation when you’re younger, Feutz says. But by the time you reach your fifties, you may be ready to shift your money to lower-risk investments. In the meantime, you may want to keep your money in a safe investment.
Another important aspect of retirement investment is to protect your money from inflation. While low-risk investments are safest, they can lose value if inflation increases. TIPS bonds, for example, pay twice-yearly interest and are available in five, ten, and thirty-year maturities. At maturity, you’ll be paid the original principal amount and adjusted principal, if any. Inflation-protected securities (TIPS) are a good option for this purpose.
If you’re worried that the stock market may crash, you should consider investing in gold, bonds, or indexed annuities. In this way, you can wait until the market recovers and move your money into a conservative vehicle like a deferred annuity. Most deferred annuities offer protection of your principal. This means that your money remains invested and earns an interest rate while the value of the annuity rises or decreases.