Life Insurance Blog

annuities vs cd’s
November 20th, 2009
in annuity

When I think of a safe place to put my money, I immediately think of a bank.  Most people I speak with would probably name a bank as the safest place.  Banks tend to be pretty safe and have the FDIC backing for deposits up to $250,000.    With that being said over 100 banks have failed this year.   If you compare that to life insurance companies, you will find that there have been no failures during that period.   Life insurance companies that issue annuity contracts have very stringent reserve requirements and have reinsurance to further backstop them.   Obviously, the higher the rating they receive from the financial ratings services the better.

We get questions about bank CD’s vs fixed annuities all the time.    They both are very safe investments, that are perfect for safe money.   The main differences, are that CD’s gains are taxable every year and fixed annuities are tax deferred.    If you pulled the gains out of the fixed annuity then the gain would be taxable too.  With a fixed annuity though, you have the ability for the gains to compound and you will not receive a 1099 then.   If a CD and an annuity have the same interest rate, the annuity will grow more with the compounding deferred interest.  Both CD’s and annuities have different term lengths that consumers can select.  For example, a 3 year year, a 5 year, and a 10 year term.   Generally the longer you lock in, the better rate of interest you can expect to earn.

No comments.

Life Insurance Info
News Letter
FlickrRSS
All Content Copyright � 2008 paramountlifeinsurance.com