"Find Out What Your Bank Does Not Want You To Know"

ANNUITIES VS CD’S

"Find Out What Your Bank Does Not Want You To Know" 

 6 Reasons To Buy An Annuity Instead Of A CD Introduction
As adverse market conditions force more investors into seeking alternatives that will provide more stability and certainty to their retirement portfolios, annuities have, once again, moved to the forefront of the investment landscape. Annuity sales topped $200 billion for the first time in 2011, and are expected to grow by double digit rates as tens of millions of Baby Boomers approach retirement. But, annuities, one of the oldest and most reliable financial instruments dating back centuries, are not without their controversy.

The financial planning community has long been divided on annuities and whether their benefits outweigh the costs. Critics point to high fees and commissions, questionable sales practices, and their unsuitability for older investors as the reasons why they should be avoided. Yet, according to an August 2012 survey by Cerulli Associates, financial advisors reported that clients requested annuities more than any other unsolicited product. And, 92 percent of Baby Boomers who own an annuity report a much higher degree of confidence in their retirement future.

Any debate over the benefits of annuities inevitably invites comparisons to alternatives with similar attributes that may be less costly, or more liquid, and, generally, more suitable for one’s retirement savings needs. Most notable among the alternatives are bank certificates of deposits (CDs) touted for their absence of fees, their safety (FDIC), and their relative liquidity (when purchased in shorter maturities).

Anytime a question is posed as "are XYZs better than ABCs?" it invites controversy especially when it involves a comparison of "apples and oranges". No one will argue against the notion that annuities, or, for that matter, any particular investment vehicle, isn’t for everybody. This presupposes that, using the same rationale in reverse, CDs are also not for everybody. The only way the question can be answered meaningfully is when it’s posed in the context of any one person’s personal financial situation. Only with a good understanding of your client’s financial objective, needs, priorities and tolerance for risk, can you truly make the comparison.

As with any investment, the answer lies not in the investment itself; rather in the way and in the situation in which it is applied. That is the only context in which annuities or CDs can be evaluated. It also requires an understanding of how the investment actually works. While it is true that annuities are more complex than CDs, it is through their complexity that their unique properties can provide unparalleled benefits in the form of tax savings, guaranteed returns, and guaranteed income. But, as with CDs, annuities may not be right for everybody.

This report provides an in depth look at annuities from several vantage points for a comprehensive understanding of how they work and how they can compare to CDs.. Copyright 2012 - Annuity Think Tank – All Rights Reserved


Reason #1 - Annuities and CDs – A Straight Comparison Annuities and CDs are often compared in the same light as if they were equivalent investments. While they do share several attributes, such as guaranteed fixed yields, principal guarantees, and relative liquidity, they’re separated by some significant differences, and that precludes a straight across apples-to-apples comparison.

The only basis for any type of comparison between the two are product features. The comparison chart below was constructed from the vantage point of an annuity only because it offers more features that can be compared. Comparison of Annuities with Certificates of Deposit
Features	Annuity	CD
Guaranteed fixed yield?	Y	Y
Free from principal/market risk and price fluctuations?	Y	Y
Are interest earnings free from current taxation?	Y	N
Are accounts insured?	Y1	Y
Are interest earnings reinvested automatically with no current income taxation?	Y	N
Am I able to make small additional investments?	Y2	N
Tax liability on Social Security income eliminated on deferred accumulation?	Y	N
Liquid?	Y3	Y4
Flexible?	Y	Y
Penalty free withdrawal?	Y	N
Funds not reduced by commissions?	Y	Y
Does this investment automatically avoid the expense and delay of probate?	Y	N
Protected from legal and creditor claims?	Y	N
Guaranteed lifetime income with tax advantages?	Y	N
Income excluded from Social Security tax calculation?	Y	N
Is this investment free of annual fees and expenses?	N	Y
1 Annuities values are secured by state guarantee funds 2 When your Tax-Deferred Annuity is a Flexible Deferred Annuity versus a Single Premium Deferred Annuity; small additional deposits are allowed. 3 Surrender penalties may apply 4 Early withdrawal penalties may apply