After retirement sets in the investment years are mostly over. We saw a glowing example of a retiree losing a huge amount of his retirement money in the Enron debacle. He was profiled on television testifying in the Enron investigation that he lost $4 million dollars with the fall of Enron.

He retired years ago, yet he kept his money in their company stock, which was the stock of his past company. This goes against the conventional wisdom of not putting all of your eggs in one basket.

What are some of the alternatives he could have investigated to place his money in less risky venues. He could have taken it out, rolled it over, and placed it in a number of venues to increase it's safety.

One much less risky venue would have been a CD or certificate of deposit.

A certificate of deposit is a fixed income savings account issued by a bank with a better interest rate than a savings account.

A CD has a maturity date of from 1 month to 5 years. Money you may need in the very short term could be place in a 1 month, then some in the 1 year, and so on. The CD has a fixed interest rate and is insured by the bank. It is structured so you don't get your money at any time, but you can get it before the maturity date, but you will usually loose some or all of your interest.

You can think of the CD as a short term, low-risk, interest-paying savings account.

This is how it works. If you put $10,000 into a CD at an interest rate of 6%, you will have (10,000 x 1.06), or $10,600 at the end of one year.

If the Enron retiree had (4,000,000 x 1.06) in a CD account, he would have had $4,240,000 at the end of one year, instead of zero (0), after the one Enron stock he invested in collapsed.

Before you invest in a CD at your bank there are a few questions you should ask.

1. When does the CD mature.

You should only keep the money in for the period of time you absolutely will not need it, if there is any chance you will need the money before 2 years, don't get a CD that matures in in two years.

2. What is the interest rate?

3. What is the CD insured for?

4. What is your exact interest rate for the holding period?

5. How much would you loose if you took your money out before the maturity date?

Read all of the literature you are given and know what you are investing in before you put your money into your chosen CD account. Remember, all investments come with some risk.

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