❗Let's close the gap: We still need your help to raise $40,000 by April 1. Donate now
Ask Money

A bond ladder

Chris Farrell Aug 17, 2009

Question: Looking for safe place for investing which pays a higher yield than CD’s. As a senior, in these uncertain times, I am a conservative investor. Miriam, San Diego, CA

Answer: Today’s low yields are tough on savers, especially seniors looking to live off their savings. However, even though it appears that the recession is ending there is still a lot of risk in the economy and markets. So, I think the risk of reaching for yield is too high. I’d stick with government-backed savings, from Treasury bills to CDs.

One time-tested strategy is to create a “ladder” of CDs or U.S. Treasuries. The idea is to invest in securities with different maturities. For example, using the national CD rates published in today’s Wall Street Journal you could buy a 6-month CD at 1.25%, a 9-month CD at 1.45%, a one-year CD at 1.61% and a three-year CD at 2.61%. Now, let’s imagine in six months that interest rates are higher. You will have a short-term CD maturing at that time and you can reinvest the money at the higher rate. What if rates go even lower over the next six months? You’re still earning a relatively better return on your longer-term higher-yielding CDs. You can also do this with Treasuries bought directly from the federal government at treasurydirect.com.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.