Investing for your retirement can be risky. If you want absolute safety, then you should consider investing in an individual retirement account, or IRA, which does not lose any money. There are several types of IRAs that you can invest in which will guarantee that you'll have a minimum amount of money at retirement.
A CD IRA is an IRA which invests in bank CDs. A bank CD is a timed deposit. The deposit is guaranteed for the length of the term specified in the contract with the bank. Since the certificate of deposit pays a set interest rate, you are assured of having a specific amount of money available to you at retirement. On top of that, your IRA is insured by the Federal Deposit Insurance Corp., or FDIC.
A fixed deferred annuity IRA invests in fixed annuities. A fixed annuity is an insurance policy that guarantees a specific rate of return over a set number of years. A fixed annuity is guaranteed by the issuing insurance company in addition to a State Guaranty Corp. in the state where you live. The annuity can be converted to a guaranteed income payment at your retirement age or you may elect to make withdrawals from your IRA on a periodic or systematic (monthly) basis.
An IRA that invests in interest-bearing bonds guarantees you a set amount of money over time. Additionally, zero coupon bonds (bonds that do not pay interest as investment income) also guarantee a set amount of money over time. These bonds will provide you with a guarantee that you'll have money available for you when you retire since it will pay no less than the return stated.
Money Market IRA
A money market IRA invests in a money market. A money market may not guarantee a set interest rate. However, money markets are considered to be generally safe since the investments are always short term (one year or less). When you invest in a money market, you typically do not earn a high rate of return. This is the trade-off you make for safety of your investment principal.
- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
- IRS: Publication 590
I am a Registered Financial Consultant with 6 years experience in the financial services industry. I am trained in the financial planning process, with an emphasis in life insurance and annuity contracts. I have written for Demand Studios since 2009.