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Fixed annuities vs CDs

Why do people choose an annuity over a certificate of deposit?

Do you have a CD down at your local bank? Do you consider yourself conservative with your savings? If so, you may want to take a look at a tax-deferred fixed annuity – a popular choice for many retirees and pre-retirees.

A fixed rate of return … and so much more. A fixed annuity is another traditional way to earn higher than average accumulation rates. Like a CD, an annuity offers you a guarantee of principal and interest. At the moment, CDs commonly earn 1-1.55% interest.1 Fixed annuities offer you comparable or better rates of return plus other advantages.

The big advantage is tax deferral. You get tax-deferred growth with a fixed annuity: you earn interest on your money, interest on your interest, and interest on the money you would have paid to the tax man. You only pay taxes on the money in a fixed annuity when you withdraw that money. Contrast that with a CD, where the interest you earn is taxed every year.

The assets in a tax-deferred fixed annuity accumulate at a set rate of growth over a specified or adjustable period. Some fixed annuities even have a first-year “bonus rate”. Accumulations can be paid to you periodically, or you can let them compound. The investment risk is assumed by the insurance company.

A check in the mail for the rest of your life. Really? Yes, that is often the case. Fixed annuities commonly offer you the option of guaranteed lifelong income, in the form of monthly or annual payments through annuitization or an income rider. Many fixed annuities also offer a guaranteed death benefit. Fixed annuity proceeds are even exempt from probate with proper beneficiary designation.

Ask yourself: would you rather have a bank CD that brings you a slight, taxable increase in your money after a period of time, or a tax-deferred investment that can bring you a guaranteed check for life? Weigh this choice, and you see why so many people choose an annuity.

Now you see why fixed annuities can be very attractive. When you compare the advantages of a tax-deferred fixed annuity to the advantages of a CD, the fixed annuity looks very good indeed. (You can even transfer a CD to an annuity.) Please call me if you would like to know more about a tax-deferred fixed annuity – a conservative choice that could be great for you financially.

These views are those of the author and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please consult your Insurance Advisor for further information. Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Carefully consider the risks, expenses, potential loss of principal and clients’ individual objectives before reallocating existing monies into these products. Agents may not give tax, legal, accounting or investment advice. Individuals should consult with a professional specializing in these areas regarding the applicability of this information to his/her situation.

The Internal Revenue Code already provides tax deferral to IRAs, so there is no additional tax benefit obtained by funding an IRA with an annuity; consider the other benefits provided by an annuity, such as lifetime income and a death benefit. 16832 | 252031

Citations. 1 www.bankrate.com

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

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For more than 14 years our mission at West Financial Group has been to guide our valued clients to financial security. We strive to address all of your concerns, ensure you understand the products we recommend and take pride in knowing you’re comfortable with the direction and strategy we provide you.

Our goal is to provide a “WOW” experience at every client interaction! We want every meeting, phone call and event to be an interaction worth talking about. We want our clients to be able to say, “WOW, what an experience! I can't wait to tell my friends about our financial professional.”

Whether it’s financial, retirement, legacy planning or optimizing your future wealth, our approach includes understanding your unique situation, exploring your goals and discovering the best way to make the REST of your life, the BEST of your life. By getting to know you and your family, we serve as financial guides who keep your best interests in mind throughout the entire process.

Skip West | Financial Planner | West Financial Group

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