CD or Savings Account, which is Best for Retirees?

Retirees have a variety of options when it comes to saving and investing their money, but two popular choices are certificates of deposit (CDs) and savings accounts. Both of these options offer retirees the opportunity to earn interest on their savings, but they have some important differences to consider.

Certificates of deposit are typically offered by banks and credit unions, and they are a type of time deposit. This means that the money is deposited for a fixed period of time, usually ranging from a few months to a few years. In exchange for this commitment, CDs typically offer a higher interest rate than savings accounts. However, if the money is withdrawn before the end of the term, there is usually a penalty.

The best 12-month CD rates are currently around 4.50 percent, while the best savings rates available right now are just lower around 4.15 percent.

Certificates of Deposit or Savings Accounts

Savings accounts, on the other hand, are a more flexible option. They can be opened at banks, credit unions, and online banks, and they typically offer lower interest rates than CDs. However, the money can be withdrawn at any time without penalty. Some savings accounts come with a debit card which allows the account holder to use the money as if it is in a checking account and make transactions, federal law (Regulation D) limits withdrawals to 6 per month with a savings account.

Retirees who are looking for a safe place to save their money and earn some interest might find CDs to be a good option. They offer a higher interest rate than savings accounts and are insured by the FDIC or NCUA, which means that the money is protected up to $250,000 per depositor. CDs are also a good option for retirees who are looking for a predictable return on their investment because of the fixed rate nature of CD accounts, while savings accounts have variable rates that can change at any time.

However, retirees who want more flexibility and ease of access to their money might prefer a savings account. These accounts typically have lower interest rates than CDs, but they also have no penalty for early withdrawal. Additionally, the ability to use the account as a checking account and make transactions can be useful for retirees who are budgeting and managing their money.

In conclusion, both certificates of deposit and savings accounts offer retirees the opportunity to earn interest on their savings. CDs are a good option for those who are looking for a higher interest rate and predictability, while savings accounts are a good option for those who want more flexibility and ease of access to their money. Ultimately, the decision will depend on the retiree's individual financial goals and needs.