Just Say No!

Everyone remembers Nancy Reagan's anti-drug campaign, "Just Say No to Drugs!" Great in theory, ridiculously weak in practice. Didn't have a chance but what did she know, Nancy had to stand for something. The same can be said for bank CD's and your retirement. Good in theory...

I can't tell you the amount of grief I've been getting over this blog. It's easy to say when you speak the truth, you've got to take some crap -- no matter the subject. But when it comes to peoples view of money. Fuhget about it!

Case in point. By a show of hands, who believes a bank CD is the safest investment you can make outside of a savings account, that pays less.

Uh huh. I see a lot of hands.

Opposed? Not that many.

Most people wouldn't associate CD's with any risk at all. They offer a guaranteed return and the FDIC insures them up to $100K.

So what's my problem -- today?

My problem is too many of us are still relying to heavily on CD's when it comes to our retirement savings. The R-I-S-K, not a four letter word comes in to play when you think of a CD as a long term investment. When you're planning for retirement your money needs to grow. I strolled into Bank of America yesterday morning and did everything I could to hold my laughter in when I saw a sign that read,:

1 Year CD Rate 2.75%.

Why even make a sign?

If anyone, I mean anyone is putting their money in a CD today, they should have their head examined.

Why?

Bank of America stock closed today at $40.37 on the low range of its 52 week high of 52.96.

It's paying a yearly dividend of $2.56.

That's a yield of 6.3% a year!

The stock can stay exactly where it is and you'll make money. If it goes down 6.3%, you break even. Heck, you might even lose money but at least you're in control! Not the Bank of America, that takes your money, gladly pays you your 2.75% and makes 4 times that somewhere else. It's 2008, lets join the rest of the world's population when it comes to investing and incorporate RISK!

Why would anyone walk into Bank of America, wait an hour to see their "investment advisor" and decide to voluntarily invest in an instrument with a guaranteed return of 2.75% and avoid the stock investment with more than a double rate of return?

Why, because our communities hate risk.

In the stock market, no risk equals tiny, tiny, tiny reward. Ok make that no reward. Why bother, 2.75% doesn't keep pace with inflation, that always measures around 4%.

There are a number of investments that provide some safety but more important diversification. Private REIT's, Index and Variable annuities are more expensive but provide guarantees up to 7%.

They're not too good to be true, they're too good to be free.

Corporate Bonds are another alternative.

Please use some creativity when it comes to your retirement. In todays stock market you have to. But your retirement cash needs to have track shoes on not 1968 snow boots when it comes to having enough money to live comfortablly in retirement. So don't let your CD rollover--again. Put on your thinking cap, call your investment advisor and assume some R-I-S-K!