In this message I would like to highlight some of the many advantages annuities have over bank CDs.
First both offer safety of principal in fact they both GUARANTEE your principal. CDs do it via a small reserve requirement of less than 6% and the balance of the guarantee covered by an insurance policy purchased from the FDIC. There is a limit of $250,000 per person per account for the FDIC guarantee.
Annuity principal amount is guaranteed by the insurance company which by law must have $1.03 dollars in liquid reserve for every dollar you have in your account. And there is NO limit on the amount of your principal guaranteed, which could account for more sophisticated and high net worth clients purchasing larger annuities.
Furthermore, it must be said that NO annuity purchaser has EVER lost $1 in principal from the defaulting of an insolvent insurance company. The same CANNOT be said for bank CDs purchasers. There are thousands of bank clients who’ve lost thousands of dollars in savings accounts that were over the FDIC limits when the bank became insolvent. If history is any indication it would appear safety is on the side of the annuity purchaser.
Secondly, the tax deferred growth of an annuity allows more control over when the interest is taxed and allows for you to accrue interest on money that would have been paid in taxes were your money in a CD. And it would allow for a greater long term rate of return. The advantage is clearly on the annuity’s side here.
Thirdly, although you incur an initial surrender fee schedule with an annuity. It decreases each year and eventually disappears completely. After the maturity date of the CD you are forced to repurchase another CD or renew it, initiating a NEW early withdrawal penalty. Therefore in essence the early withdrawal penalty for CDs will NEVER end. The advantage for this comparison again goes to the annuity.
Finally, the annuity is the only retirement savings vehicle that can guarantee an income that you cannot outlive. Banks don’t even try to compare this feature when trying to match CDs up to annuities.
So to dispell misconception number 6 regarding annuities: CDs are NOT better retirement savings vehicles than annuities
If you would like more information regarding annuities or have any questions regarding your retirement savings options feel free to contact me directly at 1-877-777-7055 or visit my website at localhost/delete
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