MarketWatch – Comparing CDs and Annuities for Savers
Take a look at these excerpts from a MarketWatch article titled, “Comparing CDs and annuities for savers” by John Gerard Lewis. In the article, AnnuityAdvantage.com is referenced as a resource for current annuity rates.
Most research and analysis on the relative merits of multi-year guarantee fixed annuities and bank certificate of deposits (CDs) are heavy on the data and can be confusing to some investors.
The problem isn’t really with CDs, which are fairly easy to understand. Take your money to the bank, go home with a certificate, and simply retrieve your principal and interest in five years (or one or three or whatever). Everyone understands CDs. They’re no-brainers.
Annuities? The very term renders one dumbstruck. They’re the haziest of retail “investments.” Generally, they’re not even investments. They’re insurance products that mostly ensure that the buyer will, at some point, receive a stream of payments that usually include part earnings and part principal. The confusion has begun already.
And they come in so many varieties that most people who buy them don’t understand how they work. They know only that they own one and that it was sold to them as a prudent and wise financial move.
But amid all of that fog sits one type of annuity that’s fairly straightforward and better meets the definition of “investment.” The multi-year guarantee fixed annuity (MYG) is more commonly known as a “CD-type” annuity. Its characteristics can be reasonably compared to those of CDs.
So how do MYGs and bank CDs stack up against each other?
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