Will CD savers ever earn a decent return?

How to build a better retirement income strategy

While investors may be hoping the Fed thinks twice about raising rates in September, it's a different story for savers who have been hard-pressed to find meaningful rates of return since 2008.

Even instruments like certificates of deposit, which generally offer higher rates in exchange for locking up savings for an extended period of time, have seen yields slip to historic lows—some lingering below savings account rates.

A Fed rate hike could change all that, but just not as quickly as savers might like it to, according to's chief financial analyst, Greg McBride. (Tweet This)

"Typically what you see is CD yields start to move up in anticipation, then that continues after the hike," McBride said. "This time around we haven't seen an anticipation move and even in response to it savers will have to shop around—a lot of banks are just going to hold the line at least at the onset."

But aside from the federal funds rate, another major factor is contributing to historically low yields that are averaging just 0.23 percent for one-year CDs. Banks are swimming in a wealth of deposits and don't have the loan demand to match. "That means it's going to take a long time before yields start going up," McBride said.

However, each bank is facing different goals and some can still take exception to the trend. As you can see from the examples here, some banks offer one-year CD rates that are lower than the annual percentage rates earned on their savings accounts while other banks still provide better CD rates.

That discrepancy in rates highlights why savers should shop around before taking the leap to lock up liquidity with a CD, said Jeffrey Tomaneng, a certified financial planner with Lincoln Investment Planning.

"If you're willing to take a look in the local market you might find smaller banks looking for liabilities on that side of their balance sheet offering a teaser rate to get you in," he said.

Still, despite the possibility of lower average rates for longer, the fact that CDs offer steady interest on risk-free, FDIC-insured principal could still make them reliable options for some savers—particularly retirees.

To his clients, Tomaneng said he advises they steer clear of CDs offering rate protection if interest rates move higher, noting that banks generally only bump rates to a fraction of where they should be.

Build a better retirement income strategy

Building a "ladder" out of CDs can help savers avoid locking in money at low rates. Savers buy CDs at staggering maturities, whether it's over several months or years. As CDs mature, savers can reinvest to benefit from rising interest rates for added flexibility.

"If you ladder CDs that mature at different intervals you'll be able to experience different rates along the way," said Christine Benz, director of personal finance at investment research firm Morningstar. She also recommends savers spread their CD purchases across banks to maximize FDIC protection, which only covers $250,000 per saver, per institution.