All retirement savers face this conundrum: Equity investments could lose principal during a bad year. But the interest on risk-free savings vehicles like certificates of deposit may not keep up with inflation. Most baby boomers are choosing to err on the side of caution, according to an online survey.
Many more workers age 50 plus say they understand and feel comfortable with savings vehicles like savings bonds and certificates of deposit, where there is little risk involved, than with more volatile investments like stocks and real estate, according to a Transamerica and GfK Roper Public Affairs and Media online survey of 2,015 working adults. Some 46 percent of the older adults are not very willing to put money into investments with any risk associated with them, which makes for much lower returns, Transamerica found.
If you don't understand how an investment option works, it's difficult to feel comfortable handing over your savings. About 48 percent of Americans over age 50 say they have a low level of experience with investing, the survey found.
Here's how older workers rated the comprehensibility of financial vehicles you can use to accumulate your retirement savings.
|U.S. savings bonds||87||68|
|Certificates of deposit||68||62|
|Money market funds||51||48|
|Real estate investments||46||30|
Source: Transamerica, 2008
Tell us, where do you feel comfortable stashing your nest egg?