CDs Offer Certainty. Dividend Stocks Offer Something Retirees May Need More
When a retiree compares a federally insured CD to a dividend stock that has raised its payout for 70 straight years, the choice turns on a factor most income calculators ignore entirely.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
The FDIC’s national average annual percentage yield on a 12-month certificate of deposit under $100,000 was 1.73% as of September 1, 2026, the highest reading in the one-year series that runs September 24, 2025 through September 24, 2026. That is the baseline average before any shopping for higher yields. The FDIC notes that top online banks routinely pay 3 to 5 times the national average, which matters when a retiree is deciding whether a fixed-rate deposit or a growing dividend belongs in the income column.
What a CD Actually Locks In
A certificate of deposit is a time deposit at a bank or credit union. You hand over principal for a stated term, commonly three months to five years, and in exchange the bank agrees to pay a fixed annual percentage yield until maturity. The 12-month national average tracked by the FDIC uses that structure and stood at 1.73% on September 1, 2026, up from 1.52% on March 1, 2026. The rate does not float during the term. If broader interest rates fall the day after you open the CD, your APY stays put. If broader rates rise, your APY also stays put, which is the trade-off.
Pull the money before maturity and the bank imposes an early-withdrawal penalty, typically several months of interest, which can eat into principal on a short-tenor CD. At maturity the deposit either rolls into a new CD at whatever rates exist that day, which is reinvestment risk, or moves back to cash. FDIC insurance stands behind principal and accrued interest up to $250,000 per depositor, per insured bank, per ownership category. That coverage does not extend to balances above the limit, uninsured products sold through the bank lobby, or the purchasing power of your dollars if inflation runs above your locked APY.
Fixed Coupon vs. a Dividend That Has Risen for Decades
A CD’s contractual payment cannot be cut. A common-stock dividend can. That is the first half of the comparison, and it is why dividend safety leads any income analysis ahead of headline yield.
The other half is that a CD coupon cannot grow, and a dividend from a durable business can. Johnson & Johnson (NYSE:JNJ | JNJ Price Prediction) raised its quarterly payout to $1.34 per share, declared April 14, 2026, marking the 64th consecutive year of dividend increases. The quarterly amount progressed from $0.75 in 2016 to $1.01 by 2020 to $1.34 in 2026. Free cash flow was approximately $19.7 billion in FY2025, and CFO Joe Wolk told analysts on the July 15, 2026 call, “We also remain committed to returning capital directly to shareholders, primarily through our dividend.”
Procter & Gamble (NYSE:PG) tells a similar durability story. The quarterly dividend rose to $1.0885 per share, the 70th consecutive annual increase and the 136th consecutive year of dividend payments since incorporation in 1890. Fiscal 2026 free cash flow was $15.84 billion, and management guided to over $10 billion in dividends in fiscal 2027. CFO Andre Schulten said P&G “returned $3.5 billion of cash to share owners in this quarter, $2.6 billion in dividends, and roughly $900 million in share repurchase.”
Neither payment carries a bank guarantee. A recession, a failed drug trial, a costly acquisition, or a category price war can force a board to trim a distribution. That risk is real, and it is the price of the possible raise. Pull an Alpha Vantage snapshot dated the June 30, 2026 latest quarter and JNJ’s trailing dividend yield reads 1.94%; PG’s reads 2.87%. Both figures move with the stock price, and share prices move. JNJ traded at $270.43 as of September 24, 2026 after a 56.59% one-year gain; PG changed by -0.05% over the same one-year window. Equity income comes with price volatility a CD does not have.
Tax Treatment Often Decides the Answer
CD interest is taxed as ordinary income at federal rates in the year it is credited, and generally at state rates as well. For tax year 2026, the IRS ordinary-income brackets top out at 37% for single taxpayers with incomes greater than $640,600, or $768,700 for married couples filing jointly, with lower brackets of 35%, 32%, 24%, 22%, 12%, and 10%. A retiree in the 24% bracket pays 24% on every dollar of CD interest, and the interest can also lift the share of Social Security benefits pushed into the taxable zone, as the FDIC’s own interpretation guide notes.
Qualified dividends from US corporations like JNJ and PG are generally taxed at long-term capital-gains rates of 0%, 15%, or 20% for investors who meet the holding-period requirement. That gap between ordinary-income rates and qualified-dividend rates is often the decisive factor for taxable brokerage accounts. Inside a traditional IRA or 401(k) the distinction collapses, since withdrawals come out as ordinary income regardless of the source.
Who Each Option Suits
A CD paying the current national average, or a shopped rate materially above it, suits the retiree who needs a known dollar amount over a defined term, will not touch principal before maturity, keeps balances within FDIC limits per bank and ownership category, and accepts that the coupon cannot rise if inflation does. A dividend grower like JNJ or PG suits the retiree with a longer horizon who can tolerate share-price volatility and the possibility of a cut in exchange for a payment stream that has, in these two cases, risen for six and seven decades respectively. Most retirement books hold room for both, in proportions that match the calendar of the bills ahead of the calendar of the market.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
