Things You Might Not Know About Certificates of Deposit
Certificates of deposit are savings vehicles used by people to accumulate wealth. many people invest in them, but did you know about:
Interest
The interest earned on certificates of deposit is fully taxed as income annually. This means that each year a portion of your interest earnings will be taken from you in the form of taxes, even if you don't take the money out!
Taxes
Interest earnings from Certificates of Deposit create taxable income. This income can cause you to owe additional taxes on your Social Security Benefits.
Availability
Your money invested in a Certificate of Deposit is not available to you penalty free prior to the maturity date. This means that you may have to pay a penalty to get your own money in the event of an emergency.
Your Estate
Your money invested in a Certificate of Deposit may not be excluded from the costs and delays of probate. Your grandchildren and loved ones may have to wait six months to two years and then have to pay the costs of the probate process before receivng any funds in a Certificate of Deposit.
Consider an Annuity!
Fixed annuities are insurance products that do not have direct downside market risk due to market fluctuations. They are guaranteed by the company that issues them. Since they offer a competitive interest rate they have been a favorite of informed financial minded individuals to accumulate and protect wealth.
Did you know that:
The interest creits earned in an annuity are taxed-deferred. You will not have to pay taxes on interest credits until you actually wth-draw that money. This allows your money to earn interest on your principal and interest on your interest!
The interest credits on an annuity are not counted as income against your Social Security Benefits unless you withdraw it. You may then be able to keep more of your Social Security Benefits. Annuities have provisions where you can receive a portion of your monies penalty-free. Since your money accrues taxed-deferred, your effective yield is higher in an annuity. For example, if you are in the 31% tax bracket and have an annuity with an after-tax interest rate of 5.75%, that has an equivalent pre-taxed return of 8.33%!
Your money in an annuity may not be subjected to the costs and delays of probate if you keep your beneficiary information current. An annuity will not force you to create another bill for your loved ones.
What do I do now?
Providing for your retirement is a complex concern. Contact an agent for additional information with no obligation whatsoever.
If you are considering an annuity for your IRA; purchase the annuity for reasons other than those inherently provided by an IRA such as death benefit and lifetime income. Annuities are not FDIC insured; are not obligations or deposits of, and are not guaranteed or underwritten by any bank, savings and loan or credit union or its affiliates. Guarantees provided by annuities are subject to the financial strength of the issuing insurance company. Indexed Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values
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Last Updated on Thursday, 14 August 2008 04:52