Tough to live off today's low CD rates

Don TaylorQuestionDear Dr. Don,
We have $100,000 to invest and we need the interest from this investment to live on. We have already lost money from our retirement account and need to make sure our investment is insured. Any help would be appreciated. We are now holding that money in a checking account while trying to find the best interest rate. What do you think of today's CD rates?
-- Cheryl Compounds

AnswerDear Cheryl,
Trying to live off the income generated by a $100,000 insured CD is difficult in today's CD rate environment. Bankrate's highest yielding five-year CD has an annual percentage yield of 3.25 percent. Living on the $3,250 in pre-tax annual interest income generated by that CD is more than problematic.

I'm hoping there's more to your retirement income than just this one investment. Ideally, you're receiving Social Security payments, and possibly have some pension income coming in, too. If that's the case, the income generated by the CD investment supplements these other sources.

It's possible that an immediate annuity is a better match for your income goals than a CD. My best advice is for you to sit down with a fee-only financial planner and discuss your retirement income options.

The Bankrate feature "Financial planners: Not just for millionaires anymore" can help you get comfortable with the decision to hire a planner as will the feature "Finding a financial planner."

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