CD Annuities: In a League of Their Own

When deciding on an annuity to invest in, investors might have some questions regarding the difference between a CD annuity and a bank CD. When closely examined, however, they will quickly realize that although they share a similar title, they share more differences than apples and oranges. A recently published article on InsuranceAgents.com reveals that those looking to make an investment with a good rate of return should strongly consider obtaining a CD annuity.

“If you’ve ever invested or considered investing fixed annuity, a CD annuity could be your next big break,” the article, CD Annuity: Not Your Average Annuity, describes. “Middle-aged to late-middle-aged investors are the ideal candidates for CD annuities because of their income. The higher the income, the more valuable the tax deferral of a CD annuity becomes.”

Investors can benefit from a CD annuity because it’s a tax-deferred investment. A CD annuity is a type of fixed annuity with a fixed interest rate and works similarly to a bank CD. Bank CDs, however, are used for short-term investments with almost no liquidity while CD annuities are typically used for long-term investments and contain limited liquidity.

There are also two main differences between a CD and fixed annuity: “Unlike a fixed annuity, whose initial interest rate is only guaranteed for as little as one year, a CD annuity’s interest is similar to the surrender period and the investment term of the annuity itself,” the article states. The other difference is that while a long surrender period is damaging to a fixed annuity, it is somewhat beneficial to a CD annuity.

“If you’re bored of a bank CD or a fixed annuity, try your hand at something new with a CD annuity,” the article suggests. “While there is some overlapping with between the three, a CD annuity is essentially in its own league. Talk with your life insurance agent to determine how you would benefit from a CD annuity in your current situation.”

Staff contribution: Rafael Onak

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