Like CDs? Try Fixed Annuities

Certificates of deposit (CDs) are popular investment products for people looking for a safe financial vehicle to earn a competitive interest rate. In exchange for depositing money with the bank for a set period of time (three months to five years), the bank pays the customer a fixed rate of interest, usually well above the amount paid by a savings account. The money is locked up in a CD account, earning interest for the set period of time. Fixed annuities are another method to save over the long term. Multi-year guaranteed fixed annuities offer all of the benefits of certificates of deposit, but with a few bonuses.

Much like a CD, you typically purchase a fixed annuity policy with a single premium deposit. In return for that premium, you receive a competitive, fixed interest rate. That rate is guaranteed for a certain number of years while your funds remain in the fixed annuity contract. Fixed annuities have longer terms than CDs – anywhere from one to ten years. However, in exchange for that longer term, fixed annuities usually have better interest rates than certificates of deposit.

Fixed annuities also offer tax benefits unavailable with CDs. While your money resides in a fixed annuity, any interest that it earns is tax deferred. Compare that to a CD, where you owe income taxes yearly on your interest earnings. Of course, you will be responsible for paying taxes once you begin receiving payments or taking withdrawals from the annuity. But many people don’t annuitize until retirement, when their income is reduced and they reside in a lower tax bracket.

The tax deferral given by fixed annuities leads to higher gains, through the power of compounding. Money normally used to pay taxes continues to sit in the annuity, earning interest.

Have you bought CDs before, and are considering purchasing fixed annuities? Fixed annuities are safe, stable financial products that are a perfect savings tool for those drawing close to retirement. Contact the Annuity Specialists at 1-888-837-4226 to learn more about fixed annuities. Our Specialists have up-to-the-minute fixed annuity rates available for your review and consideration.