CD Annuity
Below is some general information regarding CD type annuities. Please review the information to determine if a CD type annuity is right for you.
What is a CD Type Annuity?
A CD Type annuity provides a guaranteed rate of interest to the policyholder for a predetermined period of years. They are generally available from 1 - 10 year term periods. This interest can be taken monthly, quarterly or annual by the policyholder as income or it can be left to compound using the benefit of tax deferral. Because their rates cannot change during the term of the annuity they are able to provide a consistent, predictable rate of return to clients who purchase them. This is a very strong feature for people who are unsure what their next bank CD may be renewing at and rely on that CD return for a source of income or also for people looking to accumulate funds for retirement and wanting to have some control over when they pay taxes on that money.
Benefit of a CD Type Annuity
There are many different benefits that CD type annuities have over traditional fixed interest rate investments. Unlike bank CD's, CD type annuities pass along to your beneficiaries free of probate. This saves your beneficiaries from an average of 6-18 months delay in that money reaching them through the probate courts. Another benefit is that they also grow tax deferred until you make a withdraw from them or take interest from them. This tax deferral allows the policyholder to have tax "control", meaning they pay taxes to the government when they want to and at whatever tax bracket they are in when they decide to take the money. This is big because currently employed CD holders are paying taxes on their bank CD interest based on ordinary income (which may be as high as 33%). If you wait to pay taxes until you are retired you most likely will fall into the 0% or 15% tax bracket. This means more of your money and accumulated interest comes back to you instead of to Uncle Sam. Just the way you want it! This is due to the fact that Bank CD's are taxable investments so any interest not being taken as income is taxed by the government at the CD owner's current income tax rate. If you are trying to accumulate wealth for retirement or to pass on to your heirs, tax deferral is the key to your success. Fortunately, all annuities (except SPIA's) are tax deferred until you decide to take a withdraw or take income from them.
Why should I choose a CDType Annuity?
Many people choose CD type annuities for different reasons. It may be that the money you are looking at putting into a CD type annuity is specifically for retirement and therefore a better fit with the advantages of tax deferral than a bank CD. It may also be that you are looking for a consistent and reliable rate of return to provide income, unlike the bank whose rates change in shorter durations and are subject to market conditions. It may be that you are concerned about your estate and want your money to pass directly to your loved ones while avoiding the hassle of probate.
A CD Type annuity provides a guaranteed rate of interest to the policyholder for a predetermined period of years. They are generally available from 1 - 10 year term periods. This interest can be taken monthly, quarterly or annual by the policyholder as income or it can be left to compound using the benefit of tax deferral. Because their rates cannot change during the term of the annuity they are able to provide a consistent, predictable rate of return to clients who purchase them. This is a very strong feature for people who are unsure what their next bank CD may be renewing at and rely on that CD return for a source of income or also for people looking to accumulate funds for retirement and wanting to have some control over when they pay taxes on that money.
Benefit of a CD Type Annuity
There are many different benefits that CD type annuities have over traditional fixed interest rate investments. Unlike bank CD's, CD type annuities pass along to your beneficiaries free of probate. This saves your beneficiaries from an average of 6-18 months delay in that money reaching them through the probate courts. Another benefit is that they also grow tax deferred until you make a withdraw from them or take interest from them. This tax deferral allows the policyholder to have tax "control", meaning they pay taxes to the government when they want to and at whatever tax bracket they are in when they decide to take the money. This is big because currently employed CD holders are paying taxes on their bank CD interest based on ordinary income (which may be as high as 33%). If you wait to pay taxes until you are retired you most likely will fall into the 0% or 15% tax bracket. This means more of your money and accumulated interest comes back to you instead of to Uncle Sam. Just the way you want it! This is due to the fact that Bank CD's are taxable investments so any interest not being taken as income is taxed by the government at the CD owner's current income tax rate. If you are trying to accumulate wealth for retirement or to pass on to your heirs, tax deferral is the key to your success. Fortunately, all annuities (except SPIA's) are tax deferred until you decide to take a withdraw or take income from them.
Why should I choose a CDType Annuity?
Many people choose CD type annuities for different reasons. It may be that the money you are looking at putting into a CD type annuity is specifically for retirement and therefore a better fit with the advantages of tax deferral than a bank CD. It may also be that you are looking for a consistent and reliable rate of return to provide income, unlike the bank whose rates change in shorter durations and are subject to market conditions. It may be that you are concerned about your estate and want your money to pass directly to your loved ones while avoiding the hassle of probate.