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 | BANK CD vs. FIXED ANNUITY |
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Which would you rather have, $241,171 or $320,714?
Taxes, Taxes, Taxes!
The biggest draw back of a Bank CD, aside from the low rate of return, is the fact that all earnings are taxed as ordinary income. The graphic above illustrates how powerful earning tax deferred interest truly is. To illustrate your own comparison use the calculator in the margin.
Breaking down the numbers.
A $100,000 deposit over 20 years at a rate of 6% and a 25% tax bracket you would end up with $241,171 after taxes. The same investment in a fixed index annuity would result in $320,714.
Essentially costing yourself $79,543 needlessly. Strike a match to the money while the government says thanks.
When your money grows tax deferred you receive "Triple Compounding Interest". See the graphic below. Not only do you earn interest on your money, you earn interest on your interest and you earn interest on money that would have been paid to the IRS. A very powerful concept indeed.
Now let's compare the two investment vehicles.
1) Competitive interest rate/return?
YES - Fixed Index Annuity
NO - Bank CD
2) Free from market loss and fluctuation?
YES - Fixed Index Annuity
YES - Bank CD
3) Principal guaranteed or insured?
YES - Fixed Index Annuity
YES - Bank CD
4) Penalty if surrendered early?
YES - Fixed Index Annuity (no penalty after surrender charge schedule)
YES - Bank CD
5) Allows additional premiums/investments?
YES - Fixed Index Annuity
NO - Bank CD
6) Guaranteed minimum rate of return?
YES - Fixed Index Annuity
YES - Bank CD
7) Penalty waived for partial withdrawals?
YES - Fixed Index Annuity
NO - Bank CD
8) Earnings free of current taxation?
YES - Fixed Index Annuity
NO - Bank CD
9) Provisions for lifetime income?
YES - Fixed Index Annuity
NO - Bank CD
10) Automatic avoidance of probate expense and delay?
YES - Fixed Index Annuity
NO - Bank CD
11) Sales charge fee?
NO - Fixed Index Annuity
NO - Bank CD
12) Exempt from legal process?
YES - Fixed Index Annuity
NO - Bank CD
The choice is clear, you decide.
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