CD type annuities

CD type annuities

A CD annuity is an combination of a fixed annuity and CD. A CD-type annuity is a fixed annuity and generally issued by an insurance company. They are also issued by brokers and banks. The CD-type annuity assures a fixed rate for the complete period of the contract’s term. Rates range from 2% to 10%, depending on the insurance company, and the chosen contract term. This annuity can have a contract period from 1 to 10 years. The period of the guaranteed rate is in correlation to the surrender penalty of the contract. This makes an annuity a “CD-type” annuity. For example, if a CD-type annuity is procured at 3.5% for five years, the owner is sure to get 3.5% if the annuity is held for five years. The key attribute of a CD type annuity is that you know what interest rate you will get for the entire surrender period.


There are some fixed annuities that do not possess a maturity date. They generally guaranty only the rates of return for the initial year of the annuity agreement. Typically, the interest rate plunge after this initial guaranteed rate and then the rate is tied to a regular interval of time and a market benchmark.


Even though CD-type annuities and CDs share a similarity in their name, they are completely different types of investments. Classically, a CD-type annuity will commends a superior rate of return than a certificate of deposit. At present, the rates are about 1% higher for CD-type annuity as compared to the bank CDs. Any investor needs to remember, if the CD-type annuity is cashed in prior to the age of 59 and ½, the IRS would charge a 10% penalty.


Though the FDIC does not insure the CD-type annuities, there are protections for CD-type annuities. They are guaranteed by individual state reserves that are set aside by the various insurance companies. These differ from state-to-state, but coverage generally ranges from 0,000 to 0,000.


In CD-type annuities, fractional withdrawals are permissible. Most agreements permit clients to withdraw up to 10% of the annuity without paying a penalty. However, the IRS will charge a 10% penalty, if there are any withdraws before the age of 59.5 since annuities are for retirement savings and income.



CD-type annuities can be beneficial to an investor, particularly if they are older than 59 and 1/2 years. They have a superior rate of return compared to CDs for a similar guaranteed period. Investors who are retired or close to retirement time should consider a CD-type annuities as part of their portfolio.

A life annuity is a plan for distributing funds provided to the insurance company by the annuity holders. Typically a Florida Annuity provides level, regular, lifelong payments to the holder.

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