Deferred Annuities

Fixed Deferred Annuity or Bank CD
Which is right for you?

Choosing how to invest your money for retirement is always a challenge. You understand the need to diversify your portfolio. You want to reduce your exposure to risk. But still want to get the highest return possible.

The fixed deferred annuity and Certificate of Deposit (CD) are two popular, conservative investment options, which tend to be compared to one another. Look at the differences below.

Investment Considerations Fixed Deferred Annuity CD
Investment Level of Risk Low Low
Taxation Not taxed until money is withdrawn.
You benefit from the advantages of compounding interest by:
  • Earning interest on principal
  • Earnig interest on the interest
  • Earning interest on the money that would have been lost to current income taxes
Taxed in the year the interest is earned, even if you don't take money out
Guaranteed principal1 Yes - subject to claims-paying ability of insurance company Limited guarantee - FDIC up to $100,000
Money is free of market risk and price fluctuation Yes - fixed rates; interest rates credited have the potential to change over time, but are guaranteed not to be less than the guaranteed minimum interest rate state in the contract Yes - fixed rate; rate does not have potential to change
Current taxes Yes - not taxed until money is withdrawn No - interest is taxed each year
Guaranteed minimum interest rate Insurance company sets a minimum rate so they cannot go below a certain rate Interest rates will vary depending on current market conditions and the length of time to maturity
Avoids probate Yes - the annuity is passed straight to named beneficiary No - goes through probate
Able to take cash withdrawals without penalty Generally able to withdraw a portion of account value, usually 10% a year, without a surrender charge2 If you withdraw money prior to the maturity date, you may pay an interest penalty
Guaranteed lifetime income with additional tax benefits Yes No
Capable of stretching to a beneficiary Yes No