Retirees who fret over the volatility of the stock market may try to protect their financial fitness by shifting their portfolios toward safer investments. However, this move quietly increases some types of risk. Safe usually means “won’t lose nominal value,” which isn’t the same as being protected from inflation, longevity, or purchasing power erosion.
Here are some seemingly safe investments that might come with hidden perils if you are already in retirement.
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1. CDs
A certificate of deposit (CD) appears to promise true safety and peace of mind. Most banks and other institutions that offer CDs protect your money via the Federal Deposit Insurance Corp. (FDIC). That means a CD of up to $250,000 receives full protection even if your bank goes belly up, according to Academy Bank.
However, even the best CD rates are relatively low. The five-year average rate currently sits around 1.34% as of mid-2026, according to NerdWallet. That is significantly below the current rate of inflation, which was 4.2% in May. Over a long period, inflation eats away at the value of your money. A $10,000 CD that earns 3% over 20 years grows to $18,000. By contrast, a diversified portfolio of stocks that earns 10% would grow to $67,000.
Of course, there is no guarantee markets are going to perform that well in the future. However, historically, stocks have outperformed CDs by a wide margin.
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2. Long-term bond funds
Many people turn to bonds, believing they are ultra-safe. There is some wisdom to this strategy, because bonds typically do not experience the same type of volatility that stocks face. However, there are periods when the value of bonds swoons. In 2022, a total bond index that tracks investment-grade bonds tumbled 13% in 2022, according to research from Professor Emeritus at Santa Clara University, Edward McQuarrie.
In fact, 2022 was the worst year ever for U.S. bondholders. That turn of events was quite a shock for retirees who long believed that purchasing bonds was nearly as safe as tucking money into a savings account or CD. One way to avoid this fate is to buy individual bonds and hold them to maturity. No matter how much an individual bond’s value falls, you still receive your full payout if you hold the bond to maturity. This is true as long as the issuer does not default.
3. Fixed annuities with long surrender periods
Fixed annuities provide you with a steady stream of income payments regardless of what is going on in the markets or the wider economy. This type of safety and consistency appeals to many retirees.
However, these annuities often come with long surrender periods. During this time, you cannot withdraw money from your annuity without paying stiff penalties, possibly as much as 20% of your contributions, according to Equifax. Such surrender fees and other penalties make it difficult to access cash quickly when you need it.
Another big risk with fixed annuities is that the interest rate that determines your payout might not keep pace with inflation. It is possible to buy an inflation rider with an annuity, but these are often expensive and reduce the initial payout from the annuity.
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4. Money market and savings accounts
As with CDs, money market and savings accounts appear to offer a lot of safety and stability to the financial lives of retirees. But the returns from such accounts typically are even lower than what you would get on a CD.
Over a long period, such returns may badly lag inflation, especially when prices rise at a fast clip. That means your money loses value, making it more difficult to fund your wants and needs.
5. Over-concentration in dividend stocks
Many money professionals tout stocks that pay out regular dividends as a good alternative to lower-yielding bonds and savings accounts.
However, companies sometimes cut dividends unexpectedly. And there is no guarantee that putting much or all of your money into dividend stocks is going to provide returns that exceed other investments, such as an index fund focused on the Standard & Poor’s 500 index.
Dividend stocks play a role in the portfolios of many retirees. But putting too much money into such stocks often becomes risky.
6. Rental real estate
Some retirees invest in rental real estate with the hopes of generating monthly income from tenants. But buying an income-producing property also comes with many expenses that range from an additional house payment to insurance and maintenance costs.
In addition, although housing values usually climb as the years roll on, this is not always true. As the Great Recession made clear, home prices sometimes plunge unexpectedly.
Beginner landlords also may underestimate the psychological toll of finding and keeping good tenants and avoiding troublemakers.
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Bottom line
As you craft your retirement plan, remember that when it comes to generating money, increasing risk is not necessarily the right answer. Instead, it’s important to match the right assets to your time horizons.
That might mean putting short-term money in stable instruments and long-term money in something with returns that offer the potential to outpace inflation. The goal is to fully grasp which risks you’re actually taking. If you are unsure of how to move forward, consider consulting with a financial advisor.
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