As you approach your retirement, you may start wondering where the safest place for retirement savings is. All forms of retirement savings come with their own risks, and while stashing all of your retirement income in a money market fund or CD may seem like the safest option, it’s better to create a healthy balance between various types of investment vehicles.
At Avidian Wealth Solutions, our fiduciary financial advisors help high-net-worth individuals and families create a retirement plan that both builds towards their ideal future and helps them prepare for the unexpected. While we can’t tell you what that balance looks like for your personal retirement goals and risk management plan through just a blog article, we can offer you some advice on how to protect your retirement income.
Low-risk retirement investment examples
High-yield savings accounts
A high-yield savings account tends to pay 20–25 times more in interest than your standard savings account but typically needs to be held through a different bank than where your checking and traditional savings account is. Savings accounts are generally FDIC-insured meaning that your deposits are federally protected against bank failure or theft.
An important note here is that the FDIC will only insure up to $250,000 for individuals or $500,000 for married couples per account.
There are three types of fixed-income treasury securities:
- Treasury bonds
- Treasury notes
- Treasury bills
Because all three of these are government-backed, they are considered safe investment vehicles, and they are only taxed at the federal level. Out of the three, treasury bonds have the highest interest rate.
Money market accounts
A money market account (MMA) is not the same thing as a money market fund (MMF). MMAs are a type of interest-earning savings account whereas MMFs are investments in short-term debt securities. MMA’s provide a safer shelter if you are saving for retirement because they are insured by the FDIC and therefore don’t come with many risks. While MMFs are still considered to be low-risk, they are better suited as part of your short-term investment plan.
Fixed annuities are insurance contracts that you would buy for a set price. You would then get paid a regular income through a set end date or death. Fixed annuities have protections in place to help keep your retirement income safe though they come with their own risks. The risk to this form of investment is that if you pass away before you’ve claimed your total annuity, the rest of the money will go to the company you bought it from unless you bought into a joint life with the last survivor annuity.
Certificate of deposits (CDs)
CDs are agreements with a bank or credit union that offers you interest if you hold a fixed amount of money in the account for a decided period of time. At the end of your agreed time, whether it be six months or five years, you can cash in your CD and receive whatever interest you earned.
CDs, like savings accounts, are FDIC insured and offer a fixed interest rate so your account will grow with a guaranteed rate of return.
Although each of these investment vehicles provides a safer option for your retirement income with little opportunity for loss, they also provide little opportunity for high-yield returns outside of interest. Therefore, you risk not realizing your retirement goals if you rely on these as your only or primary form of retirement income.
Where should I keep my retirement savings?
So, where is the safest place to put your retirement money? We believe that in most cases, the safest place for retirement savings is in a combination of low-risk investment accounts, like the ones listed above, and perhaps in retirement accounts that are higher-risk in terms of market volatility but that offer greater opportunities for growth. Examples of these accounts would include different types of IRA accounts such as a Roth IRA or traditional IRA, 401(k)’s, stocks, and health savings accounts (HSA).
That said, working with a retirement planning financial advisor who can help you create a comprehensive retirement plan that accounts for market fluctuations and risks is equally as important as where the money is. Your retirement plan should include strategies for where you’re going to keep your retirement income, your tolerance for risk, making sustainable withdrawal rates from your retirement portfolio, and planning beyond your lifetime.
Ready to start planning for your retirement? Contact Avidian Wealth Solutions today!
As we mentioned, we believe the safest place for retirement savings may be in a combination of low- and high-risk accounts. Strictly speaking, the safest place for your retirement income is in fixed-interest accounts such as a savings account, treasury securities, money markets, fixed annuities, and CDs. Though keep in mind that despite being a safer option with low risk for loss, these investment vehicles also yield little opportunity for growth.
If you’re unsure of whether or not you are on the right path in your retirement journey, it’s time to call a financial advisor from Avidian. Avidian Wealth Solutions is a fiduciary wealth management firm that offers customized, high-net-worth retirement planning in Houston. Our team is ready to help you build towards and protect the retirement you’ve worked so hard to achieve.
To learn more about how we can help you build and maintain your retirement wealth, schedule a meeting with us today.
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