Safest Place for Retirement Money

Quick Answer: The safest places to put your retirement money are fixed annuities, CDs, Treasury securities, U.S. Savings Bonds, money market accounts, and TIPS — low-risk options that provide guaranteed or near-guaranteed growth. Among these, fixed-type annuities typically offer the highest guaranteed interest rates.

The 'safest' places to put your money are in low-risk investments and savings vehicles that provide guaranteed growth. These low-risk options include fixed annuities, CDs, Treasury securities, corporate bonds, savings accounts, and money market accounts.

You usually get the highest interest rates with fixed-type annuities of this bunch. There are other fixed-type annuities that can give higher growth potential than guaranteed-rate annuities, if that is something that appeals to you.

Retirement can be an uncertain stage in life. Markets go up and down, inflation rises and falls, and no one knows how long their retirement might last. You can explore options to grow your retirement savings with guaranteed interest earnings and then turn those funds into predictable income streams for retirement.

In this article, we will look at some of the more popular low-risk places to put your retirement money — and what each of those options can involve.

What Does "Safe" Mean for Retirement Money?

In this context, safety refers to financial products that let your money grow without much risk of loss. The relationship between risk and return potential applies here. In exchange for reduced risk, these investment and savings options tend to have lower growth potential than you would have with stocks, mutual funds, and other similar instruments.

That being said, these low-risk options let you keep more of what you have over time. Your money also grows at a compounding rate. Some "safe" places pay higher interest rates than others. For example, various fixed-type annuities will usually have higher rates than the other options discussed here.

Low-Risk Investment Alternatives for Your Retirement

There are several options that you can choose from when it comes to investing your money safely. Here is a list of the main types of investment and savings options that have little to no market risk.

Fixed Annuities

Fixed annuities guarantee both your interest and your principal. They have low risk because the insurance company that issues a fixed annuity must have at least one dollar in cash reserves for every dollar of annuity premium that they issue.

This means that if you start a $100,000 fixed annuity, the insurance company will have at least that much in cash reserves to cover you. This is required by state law in all 50 states. Fixed annuities also pay slightly higher rates of interest than CDs or Treasury securities because they aren't backed by the full faith and credit of the U.S. government.

It's also worth noting that life insurance companies have held strong in all sorts of economic and market conditions, including the Great Depression and the Great Recession of the 2000s.

Bank CDs

These investments are insured by the FDIC up to $250,000 per account, but they also pay some of the lowest rates of any low-risk financial instrument. Savvy investors often look to CDs offered by national banks, because they usually pay higher rates of interest than what you can get from your local bank.

The longer that the CD's maturity period, the higher the interest rate will be. Interest earnings in a CD will generally be taxable as income. Some CDs have a penalty if you exit them before they have matured, although not all CD products have this feature.

Treasury Securities

Securities that are backed directly by the U.S. Treasury are considered to be among the most low-risk assets around. They also generally pay lower interest earnings than other investments and savings options, just like bank CDs.

Treasury bills have maturities ranging from three months to one year. Treasury notes last from one year to ten years. Treasury bonds have maturities ranging from 10 to 30 years. The longer the maturity, the higher the rate of interest that you will earn.

Treasury securities can also be bought and sold in the secondary market. However, there is no guarantee that you will recoup all of your principal if you sell them here before they mature. The interest that is paid by Treasury securities is exempt from taxation at the state and local levels. You can buy Treasury securities directly from the Treasury Direct website as well.

U.S. Savings Bonds

Like Treasury securities, these bonds are backed directly by the full faith and credit of the U.S. Government. There are two types of savings bonds, Series EE bonds and I Bonds.

Series EE bonds are issued at 50% of face value and grow back to face value after 20 years. With I bonds, you will only pay taxes on the interest when you redeem the bonds. There is no secondary market for savings bonds, and you can only purchase $10,000 of them each year.

Like CDs and Treasury securities, savings bonds pay fairly low rates of interest. They are also not taxed at the state or local levels. You can also buy savings bonds at the Treasury Direct website.

Money Market Accounts

These stable accounts are fully liquid and often pay slightly more interest than savings or checking accounts. Some money market accounts are FDIC insured while others are not. They trade for exactly one dollar per share and have no sales charges or fees associated with them.

Money market mutual funds invest in short-term debt instruments with maturities of nine months or less. Some of the securities that they invest in include 9-month T-bills, commercial paper, repurchase agreements, bankers' acceptances, and short-term CDs.

There have been isolated instances where the price of money market shares has fallen below a dollar per share, but it's rare. Most knowledgeable investors consider money market funds to be as safe as FDIC-insured accounts.

Treasury Inflation-Protected Securities (TIPS)

We talked about different types of Treasury securities earlier. This specialized Treasury security is worth mentioning by itself. They are designed to help investors keep pace with inflation over time. When inflation rises, TIPS will periodically adjust in value instead of paying a rising interest rate.

So, when the rate of inflation increases, so will the amount of your principal, which means that you will earn more interest as a result. However, you can also earn less interest if the rate of inflation (as measured by the Consumer Price Index) falls, because your principal will be reduced accordingly.

How Much Should You Allocate to Safe Money Options?

This list covers the major types of safe investment and retirement-saving options, and how they work. However, in most cases it's not wise to put all your money into safe options, because they can also have risks, such as inflationary risk.

Diversification is always important to follow. With that said, protection and income certainty become more crucial as you move into retirement. The allocation of your retirement money might reflect those changing priorities, especially as you start drawing on your retirement assets for income.

How, then, should you determine how much of your retirement money to put into safe places? There are a few guidelines that can help you decide how much money you should have in safe investments versus riskier ones, like the stock market, such as the Rule of 100.

This rule stipulates that you should subtract your age from 100 to see the percentage of your money that you should have in the markets. So, if you are 70 years old, you should only have 30% of your money in instruments that aren't considered to be safe.

Red Flags to Avoid in Low-Risk Financial Products

There are other things to keep in mind when exploring low-risk investment and savings options for your money. Avoid options that charge you high fees. If someone assures you of a product with high returns while having "no risk," then it's good to walk away. If an investment or savings option has overcomplicated investment terms and conditions, it might not be for you.

Talk to your financial professional about these scenarios and other circumstances in which you might consider or avoid certain low-risk financial products.

Final Thoughts on Protecting Your Retirement Money

There are several different types of investments available that will guarantee your principal and interest. We have mentioned quite a few of the options that provide guaranteed growth opportunities.

While considering liquidity is important, the biggest thing to pay attention to with these low-risk options is their guaranteed rate. This will affect how much interest that your money earns, and over time, that compounding growth adds up. Different options may also have varying tax treatment, unless you hold a specific investment or savings option in your retirement account.

Consult your financial advisor for more information on these low-risk financial choices and which ones are right for you. Above all, your financial professional should have a purpose for any financial product for your money. What problem does that product solve, and how is your situation made better?

Don't be afraid to ask questions and seek clarity until you understand what your options are. These are your life savings and your retirement at stake.

Frequently Asked Questions

What is the absolute safest place to put retirement money?

The "absolutely safest" option depends on your definition. U.S. Treasury securities and U.S. Savings Bonds are backed by the full faith and credit of the U.S. Government and carry virtually no default risk — but they typically pay lower interest. Fixed annuities are not government-backed, but insurance companies are required by state law to hold cash reserves equal to at least every dollar of annuity premium, and life insurers have never failed to pay during any major economic crisis, including the Great Depression.

How do fixed annuities compare to CDs for safety?

Both are considered low-risk. CDs are FDIC insured up to $250,000 per account and backed by government guarantees. Fixed annuities are backed by state reserve requirements and state guaranty associations (up to state limits, typically $250,000). The key difference is that fixed annuities generally pay higher interest rates than CDs and also offer the option to convert accumulated savings into a guaranteed lifetime income stream — something CDs cannot do.

What is the Rule of 100 for retirement investing?

The Rule of 100 is a simple guideline: subtract your age from 100 to find the percentage of your portfolio that could be in market-risk investments. The remainder should be in safer, guaranteed options. A 65-year-old, for example, would have 35% in market assets and 65% in safe money alternatives. Some financial professionals update this to the "Rule of 110" or "Rule of 120" given longer life expectancies, but the core principle of shifting toward safety as you age remains sound.

Are U.S. Savings Bonds a good safe money option for retirees?

U.S. Savings Bonds — particularly I Bonds — can be a useful inflation hedge within the safe money category. I Bonds adjust their value with the CPI, protecting purchasing power. The downside: you can only purchase $10,000 per year, there is no secondary market, and you must hold them for at least one year before redeeming. For larger amounts, fixed annuities or Treasury securities are typically more practical.

How do I decide how much retirement money to put in safe options?

Start with your essential expenses: housing, food, healthcare, utilities. Calculate what Social Security and any pension will cover, then determine how much additional guaranteed income you need. That gap is what your safe money allocation should produce. A financial professional can run the numbers using our retirement calculators and help you choose the right combination of fixed annuities, Treasuries, and other safe vehicles to close that income gap reliably.

Looking for personalized guidance on which safe money options fit your retirement plan? Find a financial professional at SafeMoney.com — many independent advisors can review your situation at no cost.