In Hometown News, Rick Bloom was asked whether a couple in retirement should use their $50,000 savings to purchase a fixed annuity or a CD given their individual situation. Bloom’s article “Fixed annuity can be good retirement plan tool,” contains his opinion that a fixed annuity is their best option. He says that there are many great fixed annuity products on the market and points out that they are a great investment for people looking to preserve their principal. While fixed annuity rates aren’t spectacular right now, they are higher than the rate of return currently offered on CDs. Another benefit of fixed annuities is that your money grows tax deferred in the account. You won’t pay taxes until you start withdrawing the money, unlike CDs that are taxed yearly.
The two options that Bloom discusses in the article are traditional fixed annuities and equity indexed annuities. Your traditional fixed annuity investment will guarantee you an interest rate over the life of your annuity. Equity indexed annuities guarantee a rate of return as well, but they also offer a bonus based on the performance of whichever stock market index is linked to your particular annuity. Your principal is safe with both investments, but the rate of return you receive fluctuates with the stock market. In a sort of hybrid of these annuities and CDs, investors can compare equity linked CDs as another type of investment. If you are looking to purchase a fixed annuity, they are bought through representatives of the companies selling them rather than the actual company. It is crucial to find an honest and competent salesperson so do your research and speak with an expert.
