What Is the Safest Place for Retirement Funds?

Retirement planning involves carefully making financial goals that allow you to live off of your savings at some point in the future. When saving and investing money, you may want to allocate a portion of your retirement funds to the safest investment possible. While there are many investment options for you to choose from, only a few types of investments offer you guarantees against losing your retirement money.

Types

The types of investments that represent the safest place for your retirement funds are investments in fixed interest and insured financial products. These products include bank CDs, fixed annuities, whole life insurance and some types of bonds. Any investment which guarantees a return of your money plus interest represents the safest investment for your retirement savings.

Significance

The significance of guaranteed investment and savings products is that your money is generally invested into income-producing assets. These assets are guaranteed by a life insurance company, a bank or a government. Many times, these investments are guaranteed by the issuing financial institution, as well as a state or the federal government.

Benefit

The benefit of investing in safe investments is that you are guaranteed the return of your money. You cannot lose your retirement savings. By placing your money into the safest investments possible, your retirement savings earns a predictable rate of return. Most often, you can predict how much money you will have 10, 20 and even 30 years into the future.

Disadvantage

The disadvantage to the safest of investments is that they are also the lowest paying. Because you are not taking on the risk associated with more volatile investments, like growth stocks or equity mutual funds, you don't realize the potential for high returns that are associated with these other types of investments. Consequently, the safest investments may also lag behind inflation, or may require that you contribute more money to your retirement account to make up for the fact that you are not achieving a very high rate of return.

Consideration

Consider putting only a portion of your retirement savings into a fixed-interest account. This way, you can diversify your retirement savings while still protecting at least some of it. How much you allocate to safe investments depends on your risk tolerance and how long you have until you retire.

References

• "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
• "Life Insurance"; Kenneth Black, Jr., Harold D. Skipper, Jr.; 1994
• "Ernst & Young's Personal Financial Planning Guide, 5th Edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004