CD Annuity: Not Your Average Annuity

By Rafael Onak, InsuranceAgents.com Staff Writer

If you’re tired of the same old annuities selection and are in need of something new, a CD annuity might just be the fresh investment you’re looking for. But isn’t it the same as a bank CD? How does it differ from a fixed annuity? And who should invest in a CD annuity? Get answers to these and many more questions in the following informative guide on the new face in the business of annuities. Get acquainted with annuity return rates, find out how much you could make by filling out our free form.

A type of fixed annuity whose interest rate is fixed, a CD annuity closely resembles a bank CD. Upon further inspection, however, you’ll notice that the differences are larger than life. Bank CDs are best used for short-term investments with almost no liquidity. CD annuities, on the other hand, are intended for long-term investments and contain limited liquidity. The reason for this is thanks in part to its scope for partial withdrawals.  Interested in an annuity, but not sure just yet,? Talk to one of our network agents, it's free, and we'll only pair you with available life insurance agents in your local area.  Just put in your zipcode, pick an agent, and voila!

CD Annuity vs. a Fixed Annuity

But since a CD annuity’s interest is fixed, isn’t it the same thing as a fixed annuity? Simply put, NO!

Primary Differences between CD Annuity & Fixed:

• 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.
• A long surrender period is damaging to a fixed annuity, while a long surrender period is offset with a higher fixed interest rate in a CD annuity.  (See surrending an annuity)

Keep in mind, however, that the same interest-rate risks apply to a CD annuity. A long-term guaranteed interest rate can quickly turn against an investor when the rates rise, leaving an investor stranded with a lower return.

Spice Up Your Investments with a CD Annuity

If you’ve ever invested or considered investing fixed annuity, a CD annuity could be your next big break. 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.

If you’re bored of a bank CD or a fixed annuity, try your hand at something new with a CD annuity. 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.

Published: Friday 23rd October 2009