Our EWTF members are fortunate to have sound retirement savings through our Pension Plan and Individual Account Plan, each of which is professionally managed by investment consultants, and constantly monitored and adjusted as needed. The combination of our two retirement plans offers diversity in how your retirement savings is invested. The Pension Plan offers a defined benefit upon retirement and the Individual Account Plan offers carefully curated target date funds that invest in funds of varying levels of risk based on the date in which you plan to retire, and adjust those investments as your retirement date draws near.
You might, however, have “extra” money you’d like to invest outside of our Pension Plan and Individual Account Plan but the rocky waters of the investment markets have you a little scared. Understandable if so! This doesn’t mean that under-the-mattress is the only conservative place to keep your extra money. When people think of investing, they typically think of stocks, which can be high risk investments, depending on the company. However, there are other lower-risk investment vehicles you might want to consider if you don’t have the stomach for risk or a longer timeframe to weather the stock market.
CDs, or certificates of deposit, are one type of lower-risk investment vehicle and they can be purchased at a bank or via an investment advisor, such as those at Fidelity, to be held in an investment account. In short, CDs offer fixed-rate returns on a lump sum of money over a fixed period of time, such as six months, one year, or five years. CDs do require a minimum deposit and you will incur a penalty if you pull your money out before the CD matures. CDs are insured by the Federal Deposit Insurance Corporation (FDIC). It’s important to remember that because CDs are lower-risk investments, their return is less than high-risk investments, but nevertheless they still yield a return and this type of lower stress investment is much more appealing to some investors.
Money market funds are another type of lower-risk investment, similar to a mutual fund but made up of short term, low-risk, typically high-quality investments. While traditional mutual funds are comprised of stocks, money market funds are comprised of other assets such as Treasury and government securities, and are usually held for shorter periods of time making them more liquid, or readily available, than other types of investments. While money market funds are not 100% protected from any type of loss, it’s unlikely that a money market fund will lose money because of its low level of risk, short duration and investment in high quality securities. Money market funds can be purchased through a brokerage or fund company.
Treasury securities such as bills, notes and bonds are other types of low-risk investments. These investments are essentially a means to loan money to the U.S. government and in return receive back your initial investment plus interest. Bills mature in a year or less, notes can take up to 10 years to mature and bonds mature in 20 to 30 years. Bills, notes and bonds can be purchased at a bank, credit union, brokerage, or directly through the U.S. government at