As the stock market has been causing many investors to cringe over their losses on a regular basis, people start looking for safer options for their retirement funds. Fixed rate IRA Certificates of Deposit is an option that attracts many investors for building their retirement nest eggs, but there are four reasons why IRA CDs (even those with the best IRA rates) can limit the amount of money you have when you retire. All investors are faced with this decision – put your money in a safe retirement option, so you know you won't lose what you're saving; or look for other options with higher returns (but with higher risk!). Here are the four reasons why your IRA Certificate of Deposit will limit the amount of money you have when you retire:



1)Low Fixed Rate of Return on Your Investment. When compared to other investment options, an IRA CD has zero risk, but the rate of return you'll earn on the money you park at the bank is low. Banks know you're going to deposit the money into your IRA CD and forget about it until it's time to make your yearly contribution so they're happy to pay you a fixed interest on that money.

2)Your Money Earns the Financial Institution an Equal (or better) Rate of Return. While your fixed rate IRA CD guarantees you have a fixed rate (although low) on your retirement contributions, your money is also making the financial institution that same rate (or more). Other investment options allow you to earn much more of the total rate of return that you may want to consider rather than sharing the earnings of your money with the bank.

3)You're Not In Control of Your Investments. When you get an IRA CD through a bank, broker or financial institutions, you don't get to manage your own investments. The financial institution is in control, which allows them to profit from your contributions, as well.

4)Most IRA CD's Invest in Common Securities. Stocks and mutual funds experience the ups and downs of the market shifts every day, which is why you may shy away from the stock market. But common securities are what most IRA Certificates of Deposits invest in, too.

Many investors see the benefits of an IRA Certificate of Deposit to be a guaranteed rate of return, year after year. They know the money they contribute will be there, plus a little more, when they retire. There are other investors who consider IRA CD's, even those with the best IRA rates, to be a complete waste of investment dollars that would be better off earning you higher returns somewhere else.

One way to diversify would be to set up your fixed rate, guaranteed and FDIC insured deposit accounts, and then contribute a portion of your retirement savings into another option that may earn you a higher return. One possibility that interests many investors is the self directed IRA. Self directed IRAs allow you to choose where to invest your money and how to invest it, and you have a wider range of investments from which to choose from. In addition to common securities, your investments might include mortgages, businesses, real estate, or alternative fuels and green technology.

Despite the “self-directed” name, you still have a custodian to hold the funds and file required paperworks, and ensure you are within governmental regulations. Self-directed IRA's can experience returns between 12 and 30%