Certificates of Deposits, commonly known as CDs, can be the safe and secure investment answer for your retirement account.

You can have CDs in an IRA, a 401k, a Rollover account and any other type of retirement set-up.

Money Market and Savings accounts from banks could also be safe choices for investing your retirement money.
Do the ups and downs of the stock market give you a bad feeling? 

Does the whole notion of mutual funds, growth funds, junk bonds, exchange traded funds (ETFs), etc. seem overly complex and scary?

Well, if it does --- relax, you are not alone.

Safe CDs Should Be Part Of Your Retirement Account

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FDIC Insured Bank Accounts For Your IRA or 401k

The overwhelming advantage of investing in a CD is that a CD can be insured by the Federal Deposit Insurance Corporation (FDIC).  Money Market, savings, and checking accounts can also be insured by the FDIC.

The FDIC insurance amount is $250,000 per each depositor, per each bank, for each different account ownership category. 

Don't assume that a bank is a member of the FDIC.  To see if your bank is a FDIC member click this FDIC link: http://www2.fdic.gov/idasp/main_bankfind.asp
Now comes the hard part --- looking for a bank that has a good competitive interest rate that will increase your retirement income.

Generally, the longer the term of the CD, the higher the interest rate will be. 

A 5 year CD should pay more interest than a 1 year CD.
The first thing you must do is to make sure that the bank is a member of the FDIC.  If your investment is for your IRA, make sure that your bank allows you to establish an IRA account that can include CDs or Money Market accounts.
CDs, Money Market, and Savings accounts can also be a good choice for general investing of your money, irregardless if your money is in an IRA or 401k or not.

When I refer to an "IRA", it includes a traditional IRA, a Roth IRA, and an IRA that received a rollover from a 401k plan or any other retirement type plan.
The downside of a longer term CD is that if market interest rates go up, you will be locked into your old rate.  Also, if you think you may need the money in your CD, you will not be able to break the CD without  incurring a substantial penalty.  There are other things of which you should be aware.

  • Before you open a CD, you must be aware of the penalties for not keeping the CD to maturity.
  • Are there any fees for opening the CD.
  • Is the interest rate variable?  The CD may start out at a higher teaser rate before dropping to a lower rate.
  • Is the CD callable?  This means that the bank has the right to call in or redeem your CD before it matures.
  • Death benefit feature. Will your heirs be able to redeem the CD without a penalty.
Where Do I Open My CD or Bank Account?
CDs, Money Market and Savings Accounts
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Do not get confused between Bank Money Market accounts and Mutual Fund Money Market accounts.  Money Market accounts at a FDIC member bank are insured -- but a Mutual Fund Money Market account is not insured by the FDIC.
Your typical local or national bank has been the traditional place to open your CDs.  Now however, there are online bank choices where you can do all or most of your banking.  This includes opening a CD within an IRA account.

The interest rates tend to be higher at an online bank because they have less overhead --- less buildings, less employees, etc.

You can also open a CD at a mutual fund company or at a brokerage firm.  These CDs can be part of your retirement IRA or just part of your normal savings.