Planning for retirement is essential for business owners who often prioritize reinvesting profits over long-term savings. Unlike traditional employees, they may not have access to employer-sponsored retirement plans, making it crucial to explore alternative options.
Certificates of Deposit (CDs) can offer a low-risk, predictable way to diversify retirement income. With fixed interest rates and flexible term lengths, CDs provide security in uncertain markets. It can also be added to other investments or a foundation for conservative saving.
In this article, we will learn how CDs can play a strategic role in building a reliable financial future for business owners approaching retirement.
Understanding Certificates of Deposit (CDs)
Before exploring how CDs support retirement planning, it’s important to understand what is a certificate of deposit. A CD is a type of time deposit offered by banks or credit unions. You commit to leaving your money untouched for a set period in exchange for a fixed interest rate.
According to MyStages, a CD may be purchased with a variety of time durations. Depending on your financial goals and liquidity needs, terms can range from just a few weeks to several years. This flexibility makes CDs a useful tool for business owners seeking low-risk, interest-earning options to support their long-term retirement strategy.
When the CD matures, the funds can either be withdrawn and used for any purpose or reinvested into another CD to continue earning interest.
Why CDs Appeal to Business Owners Nearing Retirement
Unlike volatile investments, CDs are low-risk and insured by the FDIC up to certain limits, which provides peace of mind. They allow entrepreneurs to preserve capital while earning interest, which is crucial when approaching retirement.
According to USA Facts, only around 12% hold more than $100,000 in their savings accounts. Just 45% of individuals approaching retirement have this amount in total financial assets. These can be in various forms, such as a retirement account or certificates of deposit.
CDs are a better option for business owners nearing retirement because they offer safety, stability, and predictable returns. With flexible term options, CDs can be aligned with specific financial goals.
Time CDs for Maximum Retirement Benefit
Laddering CDs, purchasing numerous CDs with staggered maturity dates, ensures regular access to funds while maintaining steady interest earnings.
For instance, First Citizens Bank suggests that if you have a $12,000 investment, you can divide it into three CDs. You can place $4,000 each into 1-year, 2-year, and 3-year terms. As each CD matures, you can withdraw the funds you need and reinvest the amount into a new CD with the longest term.
This approach balances liquidity and growth, allowing retirees to reinvest as rates rise or use the cash when needed.
Integrate CDs Into a Broader Retirement Portfolio
While stocks and mutual funds offer growth potential, CDs provide guaranteed returns and protect against market volatility. Business owners can use CDs to safeguard a portion of their savings.
According to Bankrate, CD rates began rising in early 2022 following the Federal Reserve’s interest rate hikes. As of July 2025, the average annual percentage yield (APY) for a one-year CD stands at 2.03%. However, some of the most competitive banks are offering one-year CD rates as high as 4.40% APY.
Including CDs alongside riskier assets helps diversify the portfolio, reduce overall risk, and ensure predictable income. This conservative strategy supports financial stability, especially during retirement.
Use Business Profits to Fund CDs
Instead of leaving excess funds idle in low-yield accounts, allocating them to CDs can preserve capital while generating predictable returns. Using business profits to fund CDs is a smart way for owners to turn surplus cash into a secure, interest-earning asset.
This approach ensures that profits work toward long-term financial goals rather than sitting unused. By reinvesting earnings into CDs regularly, business owners can steadily build a retirement safety net. It offers both security and stability as they prepare for the future.
Plan for Withdrawal and Income Generation
A successful retirement strategy requires more than just saving — it also means knowing when and how to withdraw your money efficiently. For business owners using Certificates of Deposit (CDs), this involves aligning maturity dates with projected income needs. Know your short- and mid-term cash needs to avoid breaking a CD early and losing interest.
According to US News Money, there are smart ways to optimize your CD ladder. Brokered CDs can offer better rates and added flexibility if you need to sell before maturity. FDIC-insured structured notes may also be worth considering for growth potential while still managing risk.
Reassess your CD strategy yearly to adjust for rate changes and align maturities with your financial plan. To stay protected, keep your deposits within FDIC insurance limits and diversify across multiple institutions when possible.
This approach not only supports stable income generation but also helps preserve your capital throughout retirement.
Frequently Asked Questions
Are CDs a safe option for retirement planning?
Yes, they are safe. They offer fixed interest rates and are typically insured by the FDIC up to $250,000 per depositor. This makes them low-risk compared to market-based investments. CDs are ideal for preserving capital and generating predictable income during retirement.
How to avoid fines while withdrawing from a CD?
Wait until the CD reaches its maturity date before withdrawing funds. Choose CD terms that align with your financial needs to prevent early access. Consider using a CD ladder for flexibility. Some banks also offer no-penalty CDs, allowing withdrawals without fees under certain conditions.
When is the best time to invest in a CD?
Invest when interest rates are high or rising, which allows you to lock in better returns. It’s also wise to invest when you have excess cash not needed for immediate expenses. Aligning CD terms with future financial goals ensures optimal timing and benefits.
Securing the Future with Smart CD Strategies
Incorporating Certificates of Deposit into a retirement plan offers business owners a reliable and low-risk way to preserve wealth and generate income. By strategically timing, funding, and integrating CDs with broader financial goals, entrepreneurs can build a more stable retirement foundation.
With thoughtful planning, CDs provide peace of mind. It allows business owners to confidently transition from active work to a well-supported retirement life.
