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Annuity vs CD

If you ever plan on retiring, you need your financial planner to do two things:  grow your money and reduce your risk.

After the fiscal meltdown in 2008, lots of people turned back to that good old standby, a bank-issued CD. The rate of return is guaranteed, so at the time, it seemed like a win-win situation. However, the percentage of interest you're getting is usually so small that there are better strategies for padding your retirement account.

Annuities are one of those solutions. Here's how it works:

CDs versus annuities comparison chartAt Retirement?
Let's imagine a near-retiree, Mr. Jones, who is 65 years old.  He doesn’t smoke, is in good health, and falls into the 35% marginal tax bracket. 

As part of his retirement fund, he has a $300,000 CD that pays 2.5% interest. After tax, he ends up with $4,875/year. He plans to leave this CD to his grandchildren when he dies.

The Old-School Plan
Mr. Jones would just keep the CD and renew it when its term expires. It's guaranteed interest income, right?

The New-School Solution
By ditching the CD when its term expires, Mr. Jones can double his after-tax income and still leave his grandkids the same amount.

When Mr. Jones’s CD expires, all he has to do is take that $300,000 and buy a Single Premium Immediate Annuity (SPIA). Then, he can use part of the income to buy a guaranteed no-lapse universal life insurance product.

The Result
Mr. Jones now has $6,175 more after-tax income.  His grandkids still inherit a tax-free death benefit of $300,000 from his life insurance policy, the same value of the original CD he wanted to leave to them.  All thanks to the favorable rates of annuities and life insurance! 

To maximize your retirement savings, give our annuities specialist a call at 800-823-4852.


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*Comparison of each carrier’s best published rates for a
10-year level term policy, 30-year-old non-smoking female


^Represents 10-year level term life insurance rates for 40-year-old female,
in good health, no tobacco, residing in Ohio.

R. Jan Pinney CLU, ChFC is a licensed life insurance agent in all states and the District of Columbia. The following agent license numbers are provided for R. Jan Pinney as required by state law: CA agent #0440057, LA agent #291116, MA agent #1674866, MN agent #20270113, UT agent #58330, agent R. Jan Pinney, DBA Pinney Insurance Services. Commercial use by others is prohibited by law. This site provides term quotes. Each rate is a quote based on information provided by the carrier. No portion of Trusted Quote may be copied, published, faxed, mailed or distributed in any manner for any purpose without prior written authorization of the owner.

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