How Much Income Can I Expect to Receive From Safe Investments?

A Historical Perspective on Safe Investment Returns.

Interest income per year.
Don't expect much income from safe investments in today's low interest rate environment.. Wibofoto

What kind of investment returns, or approximately how much investment income, would you expect to receive from safe investments? It depends on the year. 

In our current low-interest rate environment, there is a price for safety. If you want your principal to be guaranteed, and you want a guaranteed return, expect your return to be low. Three month CDs were paying a .07% return on average in 2015. That means for every $100,000 you had invested, you earn a whopping $70 per year.

 

What about locking your money up for longer? On a ten-year fixed annuity, you might be able to get a 3.5% guaranteed rate. But you'll face hefty surrender charges if you cash it in before ten years.

Historical Safe Investment Returns

In 1981 a safe investment (such as a certificate of deposit) yielded 17.2%. For every $100,000 you had invested, you would have received $17,200 in interest income.

In 2003 that same investment yielded 2.18%, or $2,180 of interest income, per year, on every $100,000 invested.

If you retired in 2003, and only invested in safe, interest-bearing accounts, you would have found it difficult to maintain your standard of living, as inflation would have caused prices to rise while your investment income from safe investments would have steadily declined.

At the bottom of this article is a table that shows you the amount of interest income you would have received each year since 2000 for every $100,000 invested in short-term certificates of deposit.

You can compare the returns on safe investments to the historical returns on stocks by looking at how the S&P 500 index has performed. With stocks the returns have been higher - but only if you stayed invested throughout the ups and the downs. 

How to Plan for Retirement With Low-Interest Rates

With low interest rates, to plan for retirement you'll need to look at how to combine various types of retirement investments, both safe and riskier ones, in a way that can deliver the cash flow you need.

Most retirees will need to plan on gradually spending down some of their principal over their retirement years.

Start by making a retirement income plan, which is a timeline that shows what you have and what you'll need. Once you have this outlined you can see if your savings is enough to cover the gap - even if it earns a low return. 

Safe Investment Returns*

Historical 3 Month CD Returns
YearReturnAnnual Income Per $100k
20005.23%$5,230
20016.09%$6,090
20025.10%$5,100
20032.18%$2,180
20041.35%$1,350
20051.27%$1,270
20062.75%$2,750
20074.63%$4,630
20085.30%$5,300
20093.85%3,850
20101.52%1,520
2011.31%$310
2012.30%$300
2013.32%$320
2014.15%$150
2015.07%$70

*Data from the Certificate of Deposit Index (CODI) which is the 12 month average of nationally published 3-Month Certificate of Deposit rates. 

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