Getting low-risk yield has been one of the toughest challenges for retirees ever since the financial meltdown of 2008-2009. Interest rates are near zero, and many retirees are nervous about bonds out of fear that rates might jump.
All of which leaves a simple question: How about a good old-fashioned certificate of deposit?
Retirees desperate for yield can find some respectable deals these days on CDs. The yields may not sound sexy, but there’s also is no risk to principal and the Federal Deposit Insurance Corporation protects accounts up to $250,000.
There’s nothing new about the higher rates on CDs compared with bonds. Banks, especially those without extensive retail branch networks, have long offered generous rates on CDs, mostly online, as an inexpensive way to attract deposits. It’s also a way for banks to bring in retail clients who can be cross-sold other higher-margin products.