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What are Low-Risk Options for Your Retirement Savings?

Retirement can be an uncertain period in life. You no longer have the security of a full-time job or reliable source of income, and every day, you hear about inflation, rising costs, and an unstable financial market. It’s also difficult to plan too far in the future because you can’t say for sure how long your retirement will last. 

As a result, there’s little room for error when it comes to retirement savings, and it is essential that you make the right choice when considering where to save money you’ll need for your post-work years. In this article, we explore some low-risk options and provide context on how they work. 

   a. Certificate of Deposit (CD)

CDs are provided by banks and insured by the Federal Deposit Insurance Corporation (FDIC). While this makes them a safe investment option, it also means that CDs have some of the lowest interest rates out there. National banks may offer higher annual percentage yield (APY) than their state or local counterparts, however, the difference won’t be huge. 

With a longer maturity period, you can extract more value out of a certificate of deposit; the current national average APY for a 5-year CD is 0.98% compared to 0.9% for the 1-year option. This may be a low-risk way to save your retirement money, but the meager returns means it’s not the smartest option.  

   b. Treasury Securities

These are similar to CDs in that they are insured (albeit by the US Treasury) and the interest rates payable are low. Treasury bills typically carry a duration of three months to a year, so they may not be applicable for retirement savings. However, treasury notes mature within 1 to 10 years, and treasury bonds last from 10 to 30 years. 

The current rates for 10-year and 30-year treasury securities are 3.49% and 3.55% respectively, so they offer higher returns than CDs. Additionally, interest earned are exempt from state or local taxes. 

   c. Fixed Annuities

A fixed annuity is a contract between you and an insurance company, and it mandates the company to pay you returns in the future based on savings you make in the present. It’s fixed because you earn a pre-agreed interest on the money saved, no matter how the financial market behaves. And annuities are low-risk because companies that provide them are required to have cash reserves to cover all the premiums they issue. 

However, since the company has to guarantee your savings and ROI, the APY estimates may be conservative and interest earned on fixed annuities can be modest. Fixed index annuities, on the other hand, offer some of the protections of a fixed account, but with higher interest rates – you can learn more about fixed index annuities here

In conclusion, if your goal is to place your retirement savings in the safest place possible, then the low-risk options above will appeal to you. The problem is: the returns will probably be too small to make it worthwhile, and you will struggle to stay ahead of inflation – meaning your savings may end up losing purchasing power despite the fact it was invested. 

Ideally, your retirement portfolio should contain a good mix of these extremely low-risk accounts along with others that are more aggressive and offer higher returns. The tricky part is finding a good balance; a retirement advisor can help you significantly in that respect. If you need professional advice, we have an insurance expert on hand to discuss with you. And the best part? You don’t have to pay a cent for this consultation, all you have to do is follow this link and book your appointment.

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