This "Safe" Investment Could Actually Derail Your Retirement Plans

Nothing makes the bottom drop out of your stomach quite like checking your retirement accounts and seeing that all your stocks are down. You invested that money hoping it would grow your wealth over time, and now it feels like you’re watching your hard-earned savings slip through your fingers.

This feeling is so distressing that some people sell their shares and move their money to safer investments that don’t carry the same risk of loss. But that might not give you the results you hoped for.

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“Safe” investments carry risks, too

When people think of “safe” investments, they often think of things that can only make them money rather than things that carry a risk of loss. Certificates of deposit (CDs) are an example of what many see as a safe option.

You put money into one of these accounts, and you agree not to touch it for a certain number of months or years. If you do as promised, the bank pays you a certain amount of interest each month. You can usually predict exactly how much you’ll have in the CD at the end of its term upfront, and the only way to lose some of your initial deposit is to withdraw money from your CD quickly after opening the account. Then, you could face an early withdrawal penalty before you’ve earned any interest.

This usually isn’t an issue for most people, though. So it looks like it’s a safe bet for those who want to make sure their retirement savings only grow. But CDs alone aren’t likely to get you to your retirement savings goal.

The average five-year CD rate is 1.34% as of March 2026. Even most high-yield CDs, which hit major highs during the pandemic, didn’t rise much above 4%. Meanwhile, the stock market had a 10% average annual return over the last 50 years. That difference is huge.

If you earned a 3% average annual return on your CDs over 20 years, an initial $10,000 deposit would eventually be worth $18,061. Had you invested that $10,000 instead and earned a 10% rate of return, you’d have $67,275 after 20 years.

Investing is worth the risks

One thing worth pointing out in our previous example is that the outcome doesn’t depend on your investments steadily increasing in value by 10% each year. It only requires the average to be 10% over time. Your investments can do really poorly in one year and come roaring back the next, and you can still wind up doing well over the long run.

That’s why it’s important not to get hung up on short-term losses, especially if you’re a long way from retirement. If you sell your investments while they’re down to prevent further losses, you’re actually missing out on the gains you could have had if you’d allowed your assets time to recover.

Rather than trying to find the safest investments, build a portfolio review strategy that doesn’t require constant checkups. Check how your accounts are doing a couple of times per year at the most. And whenever possible, avoid making major decisions based solely on an investment’s recent performance.