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A CD type annuity or a fixed rate annuity is CD/annuity hybrid  that guarantees a fixed interest rate for a specific term. It is similar to a certificate of deposit in that they both offer long term growth and a no risk investment. It differs  from a CD in that it is issued by  an insurance company not  a bank and is not FDIC insured. However insurance companies themselves keep funds in reserve equal to the withdrawal value of your CD type annuity policy.  While annuity coverage varies state to state their reserves can range from $100,000 to $300,000. Agents from insurance companies are prohibited from mentioning state guarantees or reserves for the purpose of enticing a sale.

In addition to a CD type annuity being a safe and secure investment as part of your retirement plan the additional advantage of a CD type annuity is its versatility.  A CD type annuity can be rolled over to another annuity through a 1035 exchange tax free.  The interest from a CD type annuity can be reinvested and withdrawals can be made from this type of annuity without penalty.  After age 59 ½, a typical CD type annuity offers the possibility of withdrawing up to 10% of the initial investment annually.  Other features include the ability of withdrawing interest as monthly income.

To further explore the ways in which a CD type annuity can work for your retirement plan and for an evaluation of your retirement objectives please contact us.