Annuity Rates May Be Low Now, But That doesn’t Mean You Should Wait to Buy

The economic future for the U.S. is looking rather bleak lately. The federal government is cutting interest rates all around, affecting everything from loans, bank savings accounts and CD’s as well as fixed annuities. Do these lower annuity rates mean that this isn’t a good time to buy an annuity? Should you wait until rates rise, which could be months or years down the road? You might be surprised to find out that waiting for better annuity rates may defeat the purpose of buying an annuity in the first place – by waiting, you are missing out on an annuity’s tax-deferred savings feature and compounded growth.

Annuity rates vary month-to-month, but once you have decided to take the plunge and buy an annuity, you should consider acting on it right away. For one, waiting means that you run the risk of annuity rates falling even lower. Even more importantly, by waiting, you miss out on months of tax-deferred interest compounding – the example below illustrates this clearly.

You have $100,000 that is currently earning 1% interest in a bank savings account. You know that you need to make that money work harder for you, and you decide that a fixed annuity is the way to do that. However, the current annuity rates you see are paying only 4%, while you have heard of annuities in the past paying as much as 6%. By waiting one year until the annuity rates go up, you would lose over $3,000 in interest earnings during that one year delay. To add insult to injury, you’d also have to pay taxes on those meager savings account earnings, while the $4,000 you earned in your annuity is tax deferred until you begin receiving payments or making withdrawals. The tax deferred properties of an annuity also allow for higher compounded growth – simply put, when you don’t have to pay taxes on your earnings, your money multiplies faster.

There are competitive annuity rates to be found. The best way of finding and comparing current annuity rates is to visit AnnuityAdviceOnline.com, where you will find up-to-the-minute rates and featured annuity offerings. Or, call one of our Annuity Specialists at 1-888-837-4226 and they’ll assist you in finding the best annuity rates and terms.