For more income, savers have to take more risk

— -- Let's say you saved $1 million for your retirement. Given the stock market's recent woes, you're reluctant to park your million mackerels in a stock mutual fund. You want something safe.

So you decide to put your money in ultrasafe three-month Treasury bills. Three months later, the bills mature, and you collect your interest, all $125 of it. Clearly, the round-the-world cruise is going to have to wait.

Although the Federal Reserve's latest actions are providing some relief for the economy, savers are swooning. Just last year, three-month T-notes would have yielded 3.07% — not much, but enough for a bit of butter on your bread crusts when you're feeling giddy.

What's a saver to do? Most of your choices are fairly unappealing. But you can get a bit more income from your savings, provided you're willing to take a bit more risk.

Let's start with the basics. The return on a three-month T-bill is considered a riskless return. Should the U.S. government default on its debt, you'll have other things to worry about, such as whether to run with the mob in the street or run from it.

The Treasury auctioned $27 billion in three-month T-bills this week at 0.5%, which is a great deal for taxpayers but not for investors. If you want to get a higher yield, you need to take more risk. For example, you could tie up your money for a longer period.

Suppose you decide to buy a two-year Treasury note. You'll get a yield of 0.68%. If you buy a 10-year T-note, you'll get 2.07% from the Treasury.

Clearly, 2.07% — $20,700 on a $1 million investment — isn't enough to keep body and soul together, either. What else can you do?

One simple solution would be to buy a bank certificate of deposit. Although Treasury investors are willing to accept next to nothing, top-yielding insured bank CDs are yielding 3.5% to 4.5% across a range of maturities, says Greg McBride, senior financial analyst at Bankrate.com. (You can find a list of the top-yielding bank CDs on this page.)