Return Rate Comparison on Retirement Products

Those planning for retirement, or about to retire, have many options when it comes to retirement products in which to invest their money. The rate of return is the percentage of growth your money earns. The higher the rate of return, the more money in your account and the more money you have when you do retire.

Return rates do vary and although the differences may seem small, over the course of a typical 30 year savings period before retirement, the amount of money can be enormous. A few tenths of a percentage point each month can mean tens of thousands of dollars when it's time to withdraw the money.

Here is a comparison of current rates of return for several popular investment products:

Certificates of Deposit
CDs are like savings accounts, except you don't have instant access to the money. They are normally for a specific term, paying a specific interest rate. Currently, a 30 month certificate is paying about 1.56% annual interest. The rate is secure, as is the investment.

Index Stock Mutual Fund
Another good retirement savings vehicle is the indexed mutual fund, made up of stocks that make up a certain financial index, like the Dow Jones Industrial Average, 30 blue-chip companies and normally the most stable. The Dow has risen 5.06% between September 2010 and September 2011 and 26% since September 1999. The changes in the stock market allow for larger growth, but also allow for larger losses. The rates of return for indexed mutual funds vary by the index used, and are available in various degrees of risk and volatility.

Annuities
Annuities are contracts with insurance companies. You pay in a certain amount, either monthly or a lump sum, and they pay you out a certain monthly amount, over a period of time. There are fixed annuities, variable annuities and indexed annuities, all offering different rates of return. Current rates for tax-deferred fixed rate annuities from major providers range from 1% to 2%, based on the term.

U.S. Treasury Bonds
Bonds issued by the United States Government are very secure and should be a part of a diversified retirement portfolio. The rates are also higher than other investments right now. A 30 year treasury bill currently pays 3.52% interest, a 10-year bond is paying 1.93%. Bonds don't pay out monthly payment, instead they are purchased at a discount, then later redeemed at their higher face value.

Many investments carry fees and maintenance costs that can reduce the effective rate of return. Be sure to review all the costs and fees involved in an investment to accurately establish the real rate of return you will see.