Ric Edelman: Hi! I am Ric Edelman. In this video, we're talking about why CDs might not be your answer when you're looking for income in retirement? If you're retired or soon will be, you might be tempted to stash all your money in CDs, but that could be a terrible idea. CDs are among the most volatile of all investments, even considering the stock markets declines of the past decade. You don't realize this though because you're looking at CDs the wrong way.
Let's say you invested $10,000 into a one year CD back in 1981, the interest rate back then would have been about 15%, you would have earned $1500 in interest that year, not bad, but that rate only lasted one year. By 1986, the rate was down to 7%. The income on your CD would have dropped by more than half.
By 2009, one year CDs paid only 1.
7%. If you were a retiree relying on CD income during that time, you would have seen your income plummet and the cost of living went up. You would have needed $3500 in 2009 to buy what $1500 bought in 1981. Ouch! And that's why, putting all your money in CDs when you're close to retirement or in retirement can be a really bad idea.