Low CD rates could cause retirees to run out of money during their retirement. The days when certificates of deposit would provide enough interest to live off of are long gone. The old method of advising retirees to withdraw 4% of their savings per year is no longer viable as well. The low-yield market we are in now would cause portfolios to evaporate faster than ever before.
The 4% rule of thumb was based on a return on bonds of 2.6% and has at least 50% of investments in stocks. In a recent study by Wade Pfau, Certified Financial Analyst, Michael Finke, Certified Financial Planner and David Blanchett, CFA and CFP, a 3% withdrawal would have a 20% failure rate and therefore a 4% withdrawal rate would not be recommended any longer. They also concluded that there is no guarantee the bond rates would rebound to historical rates, either. Guaranteed income products like annuities might be the future for retirees in the foreseeable future.