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6 do’s and don’ts when using CDs for retirement

6 do’s and don’ts when using CDs for retirement

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By Spencer Tierney | NerdWallet

Certificates of deposit work as a short-term savings vehicle for goals such as upcoming home or car purchases. If you’re near or in retirement, you might wonder if CDs fit there too.

For risk-averse folks, CDs can be appealing. Safety is central to them: CDs offer predictable returns, federal deposit insurance and no volatility in value such as in the stock market.

“CDs are like that big, comfortable hug in the investing world,” says Noah Damsky, chartered financial analyst and founder of Marina Wealth Advisors in Los Angeles.

But CDs aren’t the most flexible among low-risk savings options. Here are some quick tips for what to do and not do when using CDs for retirement.

Do: Focus on short-term excess funds for CDs

Whether you’re near retirement or not, an emergency fund is a primary goal for short-term savings. Having three to six months’ worth of living expenses, or more, in a regular savings account tends to be a common recommendation. read more