Perhaps, CD Fixed Annuity doesn’t sound familiar to your ear, but if you are curious this type of investment, then through this article you will be given brief but important details about it. CD is the term of Certificate of Deposit which has similarity to the savings mechanisms provided by most banking institutions. The investment you deposit will run within a fixed period of time, normally from three to ten years. Your investment will be guaranteed a fixed rate of return for the whole length of the contract period.
There are advantages you can get if you go for this CD Fixed Annuity. The first one is the simplicity of the investment. By choosing this option of investment, you can make sure the total amount you will earn from it each year. There are also company that provide premium guarantees which mean you have the option to forfeit some of interest you earn when you have to cancel the policy after merely one year, but you will not get back less than what you have deposited earlier.
The second advantage is that you can have an easy access to your invested funds, it means you will be able to withdraw the interest amount on a monthly basis or any time during the period of the investment. However, it is suggested for you not to withdraw funds unless you have to do it. Leaving the investment means that it will benefit you more in the end.
The third advantage from having a CD Fixed Annuity is tax deferral. You need not pay the taxes for your funds on condition that the funds keep within the investment. But you must pay tax when you withdraw interest from the annuity or when it matures and you make payment.
In the comparison with other annuity investments, the CD Fixed Annuity comes with lower interest as well as returns, it also provides a greater level of security. Compared to other type of investments, the Traditional Fixed Annuity and an Index Annuity, this CD Fixed Annuity is more conservative investment preference.
A Traditional Fixed Annuity is generally the similar type of investment only it gives interest percentage for a period of 3 years, so your interest earning will depend on the condition of market within those three years. Meanwhile, the Index Annuity is related to a financial index with more risks because the losses on the market will significantly give greater impact to your investment.