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The Safest Investments for Retirement to Protect Your Money

Seeking out the safest investments for retirement will help you keep more of your money, helping you have a more comfortable retirement.

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There is no such thing as a completely safe investment. All investments inherently come with some amount of risk. However, there are some investments that are safer than others, and these investments can be helpful in retirement planning. Some of the safest investments for retirement involve savings accounts, annuities, short-term CDs, money market accounts, and Treasury securities.

Canadian investors can turn to registered retirement savings plans (RRSPs) or tax-free savings accounts as methods for investing with safety in mind.


The Safest Investments for Retirement Will Protect Your Money, not Grow It

A conservative approach to investing is what helps ensure added safety with retirement investing. During retirement, it is worth considering investments that will provide the greatest protection of principal. Some examples of these are savings accounts, money market accounts, and short-term CDs.

Savings accounts in retirement: There are a variety of savings accounts created by the U.S. federal government that have tax advantages. Some of the most popular and widely used include the Individual Retirement Account (IRA), the Roth IRA, and the 401(k).

An IRA is commonly used because anyone can take advantage of its tax savings. People can contribute up to $6,500 to an IRA each year (for 2023, up to the filing deadline), and up to $7,500 if the contributor is 50 years old or older. An IRA is tax-free so the money will grow without a tax burden. Taxes will need to be paid once money is taken out of the IRA.

A Roth IRA is different from a standard IRA. Post-tax contributions are made with a Roth IRA, so there is no tax deduction as the money is placed into the account. However, there is still a tax-free benefit from the Roth IRA as the money will grow tax-free once it is in the account. The owner of a Roth IRA can take out money from the account tax-free after reaching the age of 59 ½.

A 401(k) is a common form of retirement plan offered by businesses to its employees. Automatic payroll contributions are frequently used by employees, and in many cases the employer will match some or all of the employee contributions. There is a tax advantage with a 401(k) as earnings are not taxed until an employee withdraws the money. A Roth 401(k) is also an option, and this account allows for withdrawals to be made tax-free.

Investing in Annuities

An annuity is an insurance contract that guarantees a regular income payment. Annuities offer tax-deferred growth and can be purchased through a series of payments or with a single payment. The payout period is similar, where the recipient can receive a recurring monthly payment or one lump-sum payment. There are three main types of annuities: fixed annuities, variable annuities, and indexed annuities. Variable and indexed annuities come with the added potential of combining the annuity with other insurance products, investment options or securities.

Annuities will typically offer a fixed return or a percentage return indexed to an underlying investment (like the S&P 500). These indexed returns generally have both a floor and a ceiling that will grow the investment despite poor market conditions but cap your returns in the best-performing years.

Investing in CDs

A certificate of deposit (CD) is considered to be a low-risk investment that is federally insured up to $250,000. CDs have a term length when the investor cannot access the money without paying a penalty. CDs typically have a higher interest rate than standard savings accounts. The longer the CD’s term, the higher the interest rate.

Investing in Money Market Accounts

Money market accounts come from banks or credit unions. These accounts typically offer higher interest rates than standard savings accounts but come with a few specific requirements. There is usually a required minimum to open the account and a minimum amount that must be kept within the account. There may be fees or penalties imposed if the amount does not meet the monthly minimum. However, in return, the money market account provides insurance protection, and potentially debit card privileges and checking writing options.

Understanding Treasury Securities

Another option for retirement savings involves treasury securities. These investments are great options for guarding against the loss of principal. There are three main categories of Treasury securities, which include T-Bills, T-Notes, and T-Bonds. Each of these has varying term lengths, with the T-Bills having the shortest terms and the T-Bonds having the longest terms. The biggest benefit of investing in Treasury securities is that they are fully backed by the federal government and that the holder is guaranteed their interest and principal as long as the security is held to maturity. The Treasury also offers inflation-indexed Series I bonds to help you offset lost purchasing power due to inflation.

These options, while the safest for retirement investing, are unlikely to provide significant returns if you need to continue growing your assets during retirement. If that’s the case, you may want to consider investing for retirement instead.

What is your favorite investment for retirement?


*This post is periodically updated to reflect market conditions.

Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications, including UnDiscovered Stocks, UnTapped Opportunities, and Nancy Zambell’s Buried Treasures under $10. Nancy has worked with for many years as an editor and interviewer for their on-site video studios.