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Financial Q&A: Some alternatives for CD investors

Submit your question to Steve Dinnen at: money@csmonitor.com

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Q: I have a $50,000 CD earning 5.02 percent interest that will mature in September. I would like to keep the interest and reinvest the $50,000. I'm not interested in anything very risky and would consider another CD, but will probably earn less interest. Do you have any recommendations? I am 73 years old with no bills and own my own home.

F.H., via e-mail

A: With interest rates not moving much on CDs and inflation in food and fuel prices, Carlos Lowenberg Jr., a financial planner in Austin, Texas, tells us that income is indeed harder to come by. Further, he says, retirees typically look to bank CDs for safety, many times not realizing that there are other options with safety and guarantees.

For instance, Mr. Lowenberg says, insurance companies issue fixed annuities that typically pay rates similar to longer-term CDs. What's more, interest can be paid out or left to accumulate tax-deferred. It's important to choose a company with the highest ratings and to understand that there is far more complexity to an annuity than a CD.

Another option is a single premium immediate annuity (SPIA). SPIAs essentially are guaranteed income contracts from insurers, typically for the life of the annuity holder. A 73-year-old male could buy $2,500 in annual income with a $25,000 SPIA. With these financial products, longevity is a plus.

You may also want to consider taking a little risk with high-grade corporate bonds, he says. They can provide a higher income, but they fluctuate in value.

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