Extending the CD Ladder for Retirement Safety

Once again Congress put a temporary fix on a long term budget problem. The markets reacted positively but with continued uncertainty. Volatility remains and it is still too much for us. We continue to add to our retirement accounts at a significant rate. Therefore, to maintain a positive trend until some reasonable level of market stability is found, we are staying heavy in cash.

Last year I set up a CD ladder inside my 401(k) account. We are still in a pedal-to-the metal accumulation phase. We are also close enough to retirement that I do not want to experience another “two steps forward, three steps back” episode. (2008 is still a raw memory.) So, by shoving lots of cash into the account and accepting potentially lower returns, our retirement nest egg goal  will be achieved without substantial risk.

Therefore, yesterday I extended the CD ladder by another 6 months and put more cash into it.

It’s simple – if we don’t need to take the risk to reach our retirement income goal, there is no point in doing so.

Will I feel bad that the markets may go up 15% compared to our 5%? Maybe – for about 5 seconds.  But now I get to enjoy all of the non-stressful days not worrying about a market crash.

The risk-reward analysis should include both financial rewards and peace of mind rewards, don’t you think?

I will look at all of this again each quarter, as each of the CDs expires.

This weekend its time for our year-end net worth analysis. Stay tuned for that.  Are you tracking your net worth like us? Are you heavy in cash right now?



  1. Kathryn says

    We started a CD ladder back in 2008, when my husband rolled over his 401(k) after his layoff. Back in those days, a 5-year CD was getting 5%. We are coming to an end, in 2013, of some of those great rates. However, I am still planning to continue the ladder, low rates or not, since I can’t find anything I like better.

  2. Chuck Wiggins says

    Mark, how long ago did you start your ladder? I’m curious as to your current mix of investments that makes you feel safe about getting 5% returns. My perception is that 3% is about as good as “safe” returns are going to be right now.

    • MJP says

      Chuck – I created the CD ladder in May 2012. I my personal rate of return in 2012 was 4.95%. This is primarily due to our inflation protected investments, notably LTPZ which was up 9.9% last year. They are struggling recently but that can change in a hurry.

Leave a Reply

Your email address will not be published. Required fields are marked *