estate planning, Financial Planning

Senior Estate Planning And Retirement Investment: Where Do CDs Fit In?

By Rick Law, Elder Law Attorney and Senior Estate Planner in Aurora, IL. Bank certificates of deposit (CDs) are a type of fixed income investment over a predetermined term. Purchased from banks, credit unions and most brokerage firms, CDs have been one of the safest and most popular retiree investments. They often provide a higher return than regular bank savings accounts. One important feature is that CDs are guaranteed by either the FDIC (for banks) or the NCUSIF (for credit unions). In the past, people were limited to choosing CDs from local banks, but today the internet greatly expands the possibilities. Websites such as and can provide CD information and rate the banking institutions offering these rates. In the not-too-distant past, CD investors were very reluctant to terminate a CD earlier than its maturity date because they didn’t want to lose the interest that was earned only at the completion of the agreed certificate term. Since CDs are not liquid during the contractual term, one should always maintain sufficient money readily accessible for living expenses and modest emergencies. In the fall of 2011, the average six-month CD paid from 0.15 percent to 1.00 percent annual percentage yield (APY). A five year CD yielded between 0.50 percent APY and a high of 2.20 percent APY. The best practice for CD investing has been to “ladder” the certificates of deposit. A “CD ladder” is a series of CDs with staggered maturity dates. Retirees should consider “laddering” or “rolling” five-year maturity CDs. The goal is to have one CD maturing every year – each year a CD matures with full interest. You are then free to either roll over the CD, choose some other investment, or spend the money. (As a note, this “laddering” or “rolling” concept can also be used to stagger bonds and fixed-income annuities.) It’s important to keep accurate records of your CD maturity dates to maximize your return on investment. Failure to take action usually results in an automatic rollover of the CD that may not be at the highest interest rate available or be the best investment choice at the time. The key advantages of a CD as an investment is safety of principal. The flip side is that current yields are taxable as ordinary income. The low interest rate yield is not sufficient to cover the cost of taxes and make up the loss of purchasing power of the principal caused by inflation. Inflation is the biggest destroyer of the value of a CD. Over the last 47 years, the value of the U.S. dollar has declined by over 80 percent in purchasing power. Too many families needlessly lose everything they have.  Don’t let that be you.  If you need help building a fortress around your estate to protect it from creditors, predators, and the cost of chronic disease, give our office a call at 800-310-3100.  Your first consultation is absolutely free.  We’ll let you know what steps you need to take, right now, to protect yourself and your family.  Call now, because when you’re out of money, you’re out of options! Sincerely, Rick L. Law, Attorney, Estate Planner for Retirees. Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine,, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future.  Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care.  Appointments available in Chicago, Aurora, Oak Brook, Schaumburg, and Joliet.  Call 800-310-3100 for your free consultation now!