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Safest Investments for a Boomer’s Portfolio

As you approach retirement, you start to think more about preserving what you’ve saved rather than achieving aggressive growth. You don’t want to lose the portfolio that you worked so hard to build. However, most people who make it to the age of 65 are living almost 20 years in retirement. Social Security data shows that a man who reaches age 65 can expect to live until 83.09; for women, that age rises to 85.7; and one out of every three 65-year-olds will live until at least age 90. So preservation, though critical, may not be enough.  

Key Takeaways

  • As you get closer to retirement, it is important to find safer investments to protect the value of your nest egg.
  • Inflation is an important consideration since it can eat away at the value of your savings.
  • Certificates of Deposit (CDs) are considered very safe investments, but they may not keep up with inflation.
  • U.S. Treasuries are also considered reliable and are often used to store value during a downturn.
  • Municipal bonds, corporate bonds, and bond funds have their own advantages and disadvantages, which should be considered carefully.

Inflation Risk to Safety

There is another key factor to consider: inflation. Inflation, even though it has been low in recent years, can still rob you of your savings. 

Your portfolio needs to grow at least above the rate of inflation to continue to have the purchasing power you will need in retirement. In today’s economy, bank savings accounts earn less than 1%, so they are not a safe hedge against inflation. While they may preserve capital, you can still lose to inflation in the long term.

Bank savings accounts are good for short-term cash needs in the next year or two, but you should look to other relatively safe options for the rest of your portfolio. Let’s take a look at the top four safe investments that will allow you to sleep at night but still preserve your portfolio from inflation.

Certificates of Deposit (CDs) 

Banks offer CDs and are insured by the Federal Deposit Insurance Corporation (FDIC), which makes them just as safe as your savings account. However, you must leave your funds in the account anywhere from three months to 60 months; withdrawing them before that will cost you a penalty.

Some CDs are offered through brokerage companies, but the FDIC likely does not insure them. Interest rates vary based on the time you must leave the money in the account and the dollar amount you have on deposit. Investopedia compiles its own list of the best CD rates to help save you time. While these investments are insured, they may not earn enough interest to serve as a hedge against inflation.


Bank accounts and Certificates of Deposit are safe ways to store cash, but will lose value due to inflation. Bonds, stocks and mutual funds are much more likely to beat inflation over the long run.

U.S. Government Bills, Notes or Bonds 

U.S. government bills, notes, and bonds, also known as Treasuries, are considered the safest investments in the world and are backed by the government. Brokers sell these investments in $100 increments, or you can buy them yourself at Treasury Direct

Treasury Bills

These mature in four weeks to one year. They are sold at a discount to their face value, and then you are paid face value at full maturity. Treasury bills pay higher interest rates for longer maturity dates, so it’s worth getting 52-week bills if you plan on holding them for some time. Interest on Treasury bills is exempt from state and local taxes, but you still have to pay Federal income tax.

Treasury Notes

These notes range from two to 10 years in length. They pay interest every six months that you hold them. They can be sold at a price equal to, less than, or greater than their face value, depending on demand. Notes with a higher interest rate will likely have more demand, so their price will probably be greater than their face value.

Treasury Bonds

These mature in 20 or 30 years and pay interest every six months that you hold them. While the interest rate is guaranteed, the purchase price goes up and down, and you can take a significant loss if you need to sell them before maturity.

Municipal bonds are tax-free, making them a great option if you’re investing outside of a tax-advantaged retirement plan.

Municipal Bonds 

State and local governments sell municipal bonds to build local infrastructure and other projects for the public good. These are not only safe; they are also tax-free, which can be a great bonus for any savings you have outside an IRA, 401(k), or similar retirement investment.

They are not a good option for tax-deferred retirement accounts because they earn lower interest rates than other types of bonds, and you don’t need a tax-free investment for qualified retirement accounts. Be careful though; always check the ratings before buying municipal bonds, as some are safer than others. BondsOnline is an excellent research resource.

Bond Mutual Funds 

Bond mutual funds can be an excellent alternative to buying bonds directly. As with any mutual fund, you purchase the number of shares that you want, and a professional money manager researches the best bonds from those included in the fund’s portfolio. The three types of bond funds considered safest are government bond funds, municipal bond funds, and short-term corporate bond funds.

Safest Investment FAQs

What Are the Safest Investments With the Greatest Return?

Typically, the highest returns are associated with the riskiest investments. AAA-rated bonds are considered to be among the safest investments, but they also have the lowest yields. On the opposite end, stocks have higher risks and higher returns. However, you can reduce your risk exposure by investing in stock ETFs.

What Is the Safest Investment During a Recession?

Short-term U.S. Treasuries are considered to be among the safest investments during a recession, because of the high credit rating of the Federal government. Since the probability of a default is nearly inconceivable to most investors, Treasury bonds are considered a reliable store of value even in times of great uncertainty.

What Is the Safest Investment for Short-Term Investing?

Bonds and certificates of deposit are good options for short-term investing, they can mature in months rather than years. However, they may not hold value against inflation, so it would be wise to look for more permanent investments if you are investing for longer periods of time.

What Are the Safest Investments for a 401(k)?

There are a number of factors that should be considered for 401(k) investments, such as risk tolerance, age, and time to retirement. The typical advice is to invest aggressively when starting out, and move to less risky assets as one approaches retirement. The most rewarding assets are corporate stocks, while the safest ones are bonds.

The Bottom Line

Once you get to retirement age, preserving your portfolio becomes a critical issue—but you can overdo it. Putting all your funds in an FDIC-insured bank savings account will not earn you enough money to keep up with inflation. Other slightly more risky investments can minimize the loss of your portfolio to inflation, but still, offer little chance for growth. A portfolio that balances safety and growth is always best.