Understanding Financial Considerations

Posted on: 9 January 2023

Withdrawing and using retirement funds for day-to-day living is a delicate balancing act between growth and stability. One tool that can make this easier is a certificate of deposit (CD). Here are a few ways to use CDs to fund both the present and the future. 

1. Use a CD Ladder.

A CD ladder is an investment method that provides a steady flow of available funds at regular intervals. To create your own, get a series of CDs in increasing lengths — such as 90 days, 120 days, one year, two years, etc. If you invest in them at the same time, you can then withdraw funds and earnings from one CD as it expires, funding your retirement. 

2. Invest Your RMDs.

Do you have to take required minimum distributions (RMDs)? IRS rules require that Americans start withdrawing tax-advantaged account money at a certain age (usually 72) to pay taxes on it. But don't spend that money if you don't yet need it. Instead, put it into a more accessible CD so that it can continue to grow as part of your retirement plan. 

3. Return Leftover Funds.

Plan how much you will withdraw from your larger retirement accounts to provide for yourself over a specific period (such as six months or a year). If you have leftover funds, a certificate of deposit is an excellent place to then reinvest the money. This way, you keep this money nearby but not immediately accessible. 

4. Transition Money Down.

The last few years are critical for retirement funds. You can't afford to lose money so close to retirement, but it's also the last chance to get in a little more growth before you stop working. Move money that you plan to use within the next year, two years, or five years so that it's insured against loss but will still earn more than a standard savings account. CDs fit the bill. 

5. Create a Budget.

Overspending is a serious concern for many retirees. You don't want to outlive your money. But withdrawing money and having it available can make it hard to stick to a budget. A certificate of deposit can help. Its maturation date and penalties for early withdrawal provide built-in deterrents against withdrawing more money — but that money is still available if an emergency arises. 

Where to Start

Which of these methods could help you be better prepared for retirement? No matter what your goals are and how you plan to spend your money, a certificate of deposit could be the answer. Learn more by meeting with a financial institution near you today, such as Bellco Credit Union.