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Annuities - Are They Better Than CD's Or Not?

Jul 31, 2008
Ditch the CD's and go for annuities. After all, annuities are tax deferred, often offer higher rates of return and are better....or are they? That is a question worth pondering.

It seems like everyone all over is recommending an annuity over CD's. Is it really because they are better....I THINK NOT!!!

Now, here is the truth and it shouldn't shock you: the number one reason most advisors recommend annuities over CD's is because they pay better-tremendously better. I am sorry if you disagree but there is absolutely no doubt in my mind that is the reason your banker or whoever would recommend a fixed annuity over a CD...for the most part. CD's barely pay anything. Fixed annuities however, can pay as tremendously more.

Point 1: CD's are NOT tax deferred. Each time you receive interest, you are forced to pay taxes on the interest where with an annuity, the tax is deferred until you decide to cash your annuity in. Score one for the annuity. But wait....some would argue that paying taxes along the way is much cheaper than accumulating a huge tax time bomb years later. That totally depends on your taxable situation but it is worth looking into depending on your individual basis.

Point 2: Annuities are not liquid. If you ever need your money from your annuity, you are forced to pay a pretty heavy penalty relative to a CD (with the exception of principal back guarantee annuities). Your only allowed to access 10% a year in any given year. CD's on the other hand are much more liquid than annuities. They give you much more flexibility when it comes to accessing your money. Score one for the CD.

Point 3: CD's are FDIC insured where annuities aren't. But, annuities are backed by the big insurance company your with. I would have to say that in terms of safety it's almost the toss of a coin if your annuity is held with a solid insurance company.

Point 4: CD's are pretty straight forward. Annuities are very trick. Definitely a point for the CD's here. CD's are so not complicated where as annuities can turn into a nightmare if youget involved with something that is more complicated than you think. Score a big one for the CD here. Easy to understand and that's never a bad thing.

Point 5: Annuities avoid probate. CD's do not. Score one for the annuity but remember that you can always do something called a TOD with your bank account that holds the CD. This stands for 'Transfer on Death' which would avoid probate as well.

FInal Analysis: As always, there is not a clear cut choice. I wanted to uncover these issues for you so that you could see and understand that it's not black and white. There are many things to consider if you are looking into a CD or an annuity. Most importantly, you have to consider what's right for you and your situation.
About the Author
Fixed annuities provide their advantages but they can be very tricky. To get a more in depth look at a CD vs. annuities, or to learn more about annuities, please visit AnnuityMD.com.

Tony Bahu is author of the controversial book, 'Annuities: The Shocking Truths Revealed.' Please visit AnnuityMD.com.
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