CDs as a Viable Retirement Option

It's never too early to think about putting money away for the future. The earlier you plan, the more money that will be at your disposal when you decide to retire. As a young person, you can put away more money before the family comes along. When planning for retirement, consider CDs as a way to save money. No, no, not compact discs – Certificates of Deposit. They represent a low-risk investment for anyone wanting to save money. They function much like a savings account at a bank or credit union.

The money that you place in a CD yields a certain interest rate over time. CDs can be opened for any virtually amount of money. The time that the money is held in the CD is also variable. The more money that you deposit and the longer the time frame, the higher the interest rate will you'll receive.

A CD is one way to give a bank more funds at their disposal. You, the consumer, put your money into a CD for five years. During that period the bank can use those funds to loan money to other customers. As a reward for allowing them to use your money, they give you a higher interest rate on your investment.

It is always better to keep the money in a CD as long as you can. Once a CD reaches maturity, you can remove the money and put it into another investment vehicle or roll it into a new CD. Most banks give you a certain amount of time after the CD matures to decide what you want to do with the money.

CDs can be a good retirement-funding choice because they are safer than some other options. For seniors and those approaching retirement age, CDs are a great way to maintain the status quo. As you get older, the risk you want to take with your investments usually starts to lessen. No one wants to take a big gamble with all of their retirement funds when they are five years from retirement. When in your twenties or thirties it's understandable to increase the risk of your investments for that big return, because you have time to recoup any losses you may incur.

People who have achieved a comfortable level of savings for retirement can use CDs to protect that money and still earn some interest on it. Their money isn't growing as much anymore, but it's in a safer position. Furthermore, they can afford to lock the money away for the term of the CD. A less financially-stable person may need the money sooner, so they might benefit more from another investment vehicle – such as a money market account in which the funds can be easily accessed when needed.

CDs can be useful to all people saving for retirement, but more so for those who have already taken the risks and cashed in on some big returns. They can then securely lock their money away until it's time to use it.

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