Another option for conservative boomer investors are certificates of deposit. When you put your money into a CD, you agree to leave your money with the bank for the term specified on the certificate. In return for that time guarantee, the bank pays you a higher rate of interest than a typical savings account. Generally, larger deposits and longer timelines translate to better rates.
CDs don’t carry costs, but they do incur penalties if the money is withdrawn prior to maturation — which can range from a few months to a decade, depending on the CD.
Boomers looking to benefit from higher rates while still maintaining liquidity can use the laddering technique, whereby various CDs of differing rates and maturities are purchased so that investors can access their money at different times. Boomers can also try to arrange to have interest paid out quarterly or semi-annually to maintain increased liquidity.
“CDs are great for short-term goals and for any money you might need access too soon,” said Matt Becker, founder of Mom and Dad Money, a fee-only financial practice. Becker recommended local credit unions and online banks like Ally or Barclays for the best rates.
He does, however, caution against boomers keeping too much of their nest egg in these conservative vehicles.
“The issue with CDs and savings accounts for long-term goals is that they will almost certainly lose value due to inflation,” he said. “That’s why it pays to be a little bit more aggressive with your long-term savings.”
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