Annuities – Lower Risk Alternative to Bonds
A bond is essentially an I.O.U. that is issued by a corporation or government agency in exchange for a predetermined amount of money. Money is made when the issuing entity pays interest on that certificate, typically at a fixed rate.
Bonds can be issued by a wide range of corporations and government agencies. Treasuries are the highest quality bonds and are backed by the full faith and credit of the U.S. government. Municipal bonds are issued by local authorities and are exempt from federal, state, and local taxes. Corporate bonds are similar to government bonds in their maturation process but come with what is usually considered an increased amount of risk. The attraction of corporate bonds is that they generally offer investors a higher potential yield.
Fixed annuities share many similarities to bonds. They are contracts issued by insurance companies to individuals in exchange for a premium deposit. Like bonds, fixed annuities typically earn interest at a predetermined rate.
However, there are some key differences between bonds and fixed annuities.
The values of bonds alter with changes in interest rates, and if sold prior to maturity may be worth more or less than their original cost. Annuities offer a lower risk alternative to bonds because the insurance company bears the investment risk, and they are tax deferred until earnings are withdrawn. Annuities also offer the ability to create a guaranteed lifetime income stream that can help support you in retirement…a feature not available with bonds.
If you would like to learn more about your options and how annuities can help meet your needs, please fill out the form on this page today. Your information will be kept confidential and secure. After submitting the form you will receive an email from Annuity Advantage with our free brochure. Contact us today to find out how we can help secure your safe money funds.