subject: The Right Investment For Your Retirement [print this page] A CD type annuity is a mixture of a fixed annuity and CD. The CD-type annuity assures a permanent rate for the total period of the contract terms, anywhere from 1 to 10 years. The rates for cd-type annuities may vary from 3-10%, depending on the insurance company, state interest rates, and the preferred agreement term. Investors increasingly have been concerned about the pursuit of a secure return for their retirement and non-retirement accounts. In particular the CD-type annuity can provide for a higher return than the certificate of deposit that one can buy from a bank.
When it comes up to CDs, there's an amount of confusion out there as they share the name with CD-type Annuities. The CD-type annuities generally offer higher rates as well as tax deferred growth of the investments. CDs on the other hand are locked and you must pay a penalty to get out of them. The Cds are backed by FDIC insurance up to $100,000 if held in a non-retirement account. Cd-type annuities are instead backed by the insurance state reserves which can vary from $100,000 to $300,000 depending on the state.
One potential disadvantage to cd type annuities may be if interest rates go up. You might be locked in at a lower rate in that scenario. CD-type annuities are permanent rate annuities. They are different from most fixed annuities in that the definite rate terms will matches the penalty stage term. In other words, if you acquire a five year CD type annuity at 4 percent, you are assured to get a 4 percent per annum if you hold the CD type annuity for five years.
Additionally fixed rate Annuities have no maturity date and regularly promise a rate simply for the first year. The interest rate typically goes down after the definite time and is locked in for every twelve months. Only licensed insurance professionals are permitted to sell CD-type annuities. There are assortments of annuities in the market place care should be taken to compare their advantages and disadvantages. The investing public should take comfort from the backing of the insurance companies behind these products, as well as their claim paying abilities.
The CD-type annuity was created to assist with the situation of insurers giving assurances to carry on paying an elevated rate of interest after the guarantee period. Rates were declining and investors were not receiving what they estimated, so they paid an early termination penalty to get out of the contract. But that doesnt mean that CD-type annuities are not safer or smarter than the return that you get with a CD that you would obtain from a bank. So Cd type annuities can be an advantage to investors particularly if they are older than 59 years old. They can continue to invest money and let it grow tax deferred, and the rates of return will be higher than those of a bank CD.
by: Mr Frank
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