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

A Historical Perspective on Safe Returns

Chart of retirement investments

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The idea behind retirement savings is to accumulate as much money as possible with the least amount of risk. So how much investment income might you expect to receive if you stick to safe investments?

There's no simple answer to that because it depends on the year. There's a price to be paid for safety in a low-interest rate environment. If you want to guarantee your principal and you want a guaranteed return, you should expect your return to be low. If a three-month CD is paying a .07 percent return on average, that means you'd earn a whopping $70 per year for every $100,000 you invest.   

What about locking your money up for a longer period of time? You might be able to get a 3.5 percent guaranteed rate on a 10-year fixed annuity, but you'd face hefty surrender charges if you cashed it in before the 10 years elapses. 

Historical Safe Investment Returns

safe investment such as a certificate of deposit yielded 17.2 percent in 1981. You would have received $17,200 in interest income for every $100,000 you invested. But that same product yielded just 2.18 percent in 2003, or $2,180 of interest income per year for every $100,000 invested.

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

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 over the years. The returns have been higher with stocks, but only if you stayed invested throughout the ups and the downs. 

How to Plan for Retirement With Low Interest Rates

Look for ways to combine various types of retirement investments, both safe ones and riskier ones, in a way that can deliver the cash flow you need if you're planning for retirement during a period of low interest rates. Most retirees will have to plan on gradually spending down some of their principal over their retirement years.

Start by making a retirement income plan — a timeline that shows what you have and what you'll need in future years. You can then see if your savings is enough to cover the gap after you have this outlined, even if it shows a low return. 

Safe Investment Returns*

Historical 3 Month CD Returns
Year Return Annual Income Per $100k
2000 5.23% $5,230
2001 6.09% $6,090
2002 5.10% $5,100
2003 2.18% $2,180
2004 1.35% $1,350
2005 1.27% $1,270
2006 2.75% $2,750
2007 4.63% $4,630
2008 5.30% $5,300
2009 3.85% 3,850
2010 1.52% 1,520
2011 .31% $310
2012 .30% $300
2013 .32% $320
2014 .15% $150
2015 .07% $70

The situation improved slightly in 2016 with an average rate of return of .16 percent over six months, but this was well below what it had been in the years prior to 2010. This rate would have earned you meager $160 a year on a $100,000 investment. 

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