Editors' pick: Originally published Nov. 3.

Retirees--who have been rolling short-term CDs for the past eight years and earning next to nothing--are about to get their wish. Interest rates may soon rise, albeit slowly.

So, for those folks who might be using their CD as a parking place from which to take required minimum distributions (RMDs), how might they go about earning a bit more on their money without putting too much principal at risk?

Stagger your portfolio by expected time horizon. How you might invest your money depends on a couple things, said Christine Benz, director of personal finance and senior columnist for Morningstar.

"If you're risk-averse or an older retiree - especially those for whom RMDs are steep - being conservative with most or all of the money is sensible," she said.

However, Benz likes the idea of staggering the portfolio by expected time horizon, especially for RMDs, diversifying across investments ranging from ultra-conservative cash investments to short- and intermediate-term bonds (including Treasury Inflation-Protected Securities, known as TIPS, or a TIPS fund) to perhaps even some equity exposure, provided you've got a life expectancy of ten years or longer.

"The virtue of holding at least some very liquid assets alongside longer-term, higher-return holdings is that if Armageddon hits the bond and stock markets, you'll be able to take RMDs from the cash holdings without disrupting long-term positions," Benz said.

For short-term bonds, she said, consider Fidelity Short-Term Bond (FSHBX) . For intermediate-term, the usual suspects include: Met West Total Return Bond (MWTRX) , Dodge & Cox Income (DODIX)  and Fidelity Total Bond (FTBFX) .

For equity, Benz said one could easily go for a total market index, but for retirees, especially those taking RMDs, adding a quality overlay makes sense via a fund such as Vanguard Dividend Appreciation (VDAIX) .

Floor and upside. "Everyone wants to earn a bit more on their money," said Michael Lonier, a financial planner with Lonier Financial Advisory. "The question is how much risk can you afford to take."

If someone has enough retirement income from Social Security, pensions and annuities, together with liquid savings to meet current and future annual expenses and liabilities, you can afford to take more risk.

If not, Lonier said a more careful analysis is needed. "Generally in the floor, which is the amount of liquid savings needed to cover current and future annual expenses, we hedge away credit, interest rate and inflation risk by holding a liability-matched ladder of nominal or TIPS to maturity, which is designed to cover expenses in the year of maturity," he said. "Once the floor is satisfied, any additional liquid savings can be exposed to market risk in an upside global equity market portfolio."

CDs and/or bond ladders. Risk-averse investors, especially those fearful of how fast interest rates might rise, should ladder their investments, buying short-, intermediate- and longer-term CDs and/or bonds.

Michael Zwecher, author of Retirement Portfolios: Theory, Construction and Management, said investors trying to earn more must walk a fine line; they should avoid investing in longer term maturities that will fall in value when interest rates rise.

"As rates rise, anything that is locked in will be expected to lose out over the locked period," said Zwecher. "The longer the lock, the bigger the loss."

So this, he said, argues for something that adjusts quickly but doesn't give away too much if the rate rise process is slower than expected. "With safety as a concern, it would seem like shorter dated, relative to the current terms of the CDs, in Treasury bills or notes would be preferable, for example six-month to two-years," Zwecher added.

Brokered CDs. For his part, Peter Brunton, investment director at Wealth Design Services, recommends that you custody assets with a broker such as Schwab and buy brokered CDs that can be traded like any other fixed-income instrument. "Unlike traditional CDs, there are no withdrawal penalties which means you maintain liquidity," he said. "However, their pricing is still dependent on interest rates so it's better to maintain a short duration and have the initial intention of holding to maturity."

Dirk Cotton, a financial planner and author of the Retirement Cafe blog, said investors who want to stick with CDs might consider using a website such as RateWatch or Bankrate.com as the starting point for their search for higher returns. "You can even buy them in the secondary market," said Cotton. "Keep in mind that interest rates are unpredictable - no one would have guessed they would remain this low for this long."

Treasury Inflation Protected Securities (TIPS). Should inflation rise, TIPS might be a good option, said David Evensky, a principal with Evensky & Katz/Foldes Financial Wealth Management. One option: Vanguard Short-Term Inflation-Protected Securities (VTIP) offers short-duration exposure to TIPS at a very attractive price, according to Morningstar.

Alternatives according Morningstar: Vanguard Short-Term Inflation-Protected Securities Index (VTIPX) , iShares TIPS Bond (TIP) , SPDR Barclays TIPS ETF (IPE) , Short-term options: PIMCO 1-5 Year U.S. TIPS (STPZ) , and iShares 0-5 Year TIPS Bond (STIP) . Morningstar also suggests Schwab U.S. TIPS (SCHP) , the cheapest fund in the category. And investors interested in more control over their duration exposure could consider, according to Morningstar, FlexShares iBoxx 3 Year Target Duration (TDTT) or FlexShares iBoxx 5 Year Target Duration (TDTF) , which maintain targeted durations of three and five years, respectively. Both funds carry a 0.20% expense ratio.

Two other funds to consider: Vanguard Inflation-Protected Securities (VIPSX) , which has a Morningstar Analyst Rating of Gold, and silver-rated PIMCO Real Return (PRTNX) .

Investment-grade floating rate debt. For his part, Brunton recommends investment grade floating rate debt, such as iShares Floating Rate Bond (FLOT) .

That ETF buys corporate floating rate bonds with an average credit rating of AA-/A+. The current yield is only about 0.79% after fees, but the floating rate structure allows the yield to increase with the reference rate - typically LIBOR - and is attractive in a potentially rising interest rate environment, said Brunton.

"The downside is that over half of the fund is comprised of banks (may or may not be a bad thing), not all the bonds use the same reference rate, there is always some form of credit risk, and the spread of the underlying bonds pay above LIBOR is lower than historical averages; that is, bonds are expensive period," he said.

Note, however, that not all floating rate debt is the same. "Most products sold focus on senior debt that is comprised on non-investment grade companies," said Brunton. "This adds junk bond type risk to a portfolio."

Benz, meanwhile, said investors should be cautious when using floating-rate funds. "I love floating-rate funds but consider them too aggressive/economically to play a starring role," she said. "I certainly wouldn't park a whole IRA in them, but would instead use them to serve as an 'aggressive kicker' for the bond portfolio."

Her favorite: Fidelity Floating Rate High Income (FFRHX) .

Cash-value insurance. Depending on depending how much cash is there, Christopher Grande, a principal and financial planner with Walnut Hill Advisors, said he has clients earning about 4% in cash value insurance. If you go this route, make sure the policy isn't structured in a commission-heavy way, that you are healthy and get healthy (preferred elite, super preferred vs. standard) rates, and the policy is structured for maximum cash, said Grande.

Higher risk investments. Typically, rising interest rates mean the economy is healthy. "In this type of environment one would expect equities to outperform over the intermediate term," said Brunton. "However, the S&P 500 looks fully valued at best."

One alternative, he said, is to add higher yielding fixed-income assets that have a level of risk in between stocks and bond. For example, preferred stocks yield 5.5% in this environment.

"If we expect the U.S. economy to continue its slow growth - meaning equity appreciation is capped - and interest rates to increase slowly, these are a good alternative," said Brunton. "You have to be cognizant that these investments have both equity and interest rate risk, but in a moderate environment they should perform well plus unlike junk bonds, preferreds typically have an investment grade credit rating."

One caveat. Cotton said it's tempting to reach for higher fixed-income returns nowadays but the only way to do that is to take on more risk. "While your fixed-income investments have returned very little since the great recession, you have probably done fairly well in the stock market and it is this combined total return that should be your focus, not whether it comes from stocks or bonds."

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