Is the best IRA CD around all you have in your nest egg? Would you believe that nearly any certificate of deposit you put in your nest egg will improve the risk return profile of your portfolio? There have been numerous examples in the last several years of people who are unfortunately outliving their nest eggs because of an overly conservative investment strategy.

Ditching Your Risky Asset Portfolio Too Soon Is Risky
People living on a fixed income stream are relying on their interest income to pay for medicine and other daily need items – food, electricity, etc. The mistake that people can make when making the transition from earning money and putting into 401K or individual retirement account and living off those stored funds is that they move all their funds into fixed income securities.

While this may seem to be a conservative strategy for producing income, it in fact creates a significant risk of out living the assets in the account due to not producing a sufficient return on investment for today’s extended life expectancy. Not planning to earn enough income in the future is equally risky as committing too many assets to high risk securities.

The Best IRA CD for Your Account May Be the One You Combine with a Risky Asset Portfolio
It may sound counterintuitive but the best IRA CD for a retirement account should be significantly less than 100% of your nest egg. Combining a efficient portfolio of risky assets including stocks, mutual funds, and other higher yielding assets with a high return CD can significantly improve returns without substantially increasing risk.

The best IRA CD / stock portfolio ratio for a retirement account should be around 80/20 – where perhaps in the neighborhood of eighty percent of the cash in the account should be allocated to the CDs / low-risk / fixed income assets and the remainder placed in an efficient portfolio of stocks and mutual funds.

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