Aren’t bank Certificates of Deposit (CDs) better than investments in stocks for retired investors?
No. Fixed dollar investments will not keep up with inflation. Fixed-dollar investments with short maturities, such as CDs, can offer stability of principal and may be one component of every retired investor’s portfolio. The income, however, will fluctuate widely from year to year. According to the Federal Reserve Board, during the 10 year period ended December 2000, the highest average interest paid on 6-month CDs was 6.7% (in 2000); the lowest was 3.3% (in 1993). So while the principal may be stable, it is not really safe to rely on the interest for steady retirement income. Bonds offer better solutions than CD’s. CDs are FDIC insured up to $100,000 per depositor, per institution. All rates are subject to change and availability.
