Must Know Differences Between Fixed Annuities and Certificate of Deposits

As a prudent investor, I am certain that you have found out all there is to know about certificate of deposits and fixed annuities. If you have been looking for more information on both these investment products, then you have come to the right place. Here, I am going to give you certain differences and similarities between both these products to help you understand them better and choose an investment plan that best suits you.

When you take both these investment plans in the light of taxation, a deferred annuity has a deferred tax plan. Any earning made through this particular investment is not taxable until the earned amount is withdrawn, giving you a better advantage over tax control and opportunity for better growth. Certificate of deposits on the other hand are very much taxable and the earning through such investment plans are taxed every single year. Depending upon how much your CD has earned and depending upon the tax bracket you come under, the returns on the investment plan can definitely be affected to a great extent. Since any annuity is taxed as an income of an individual, it would be best if you could make the withdrawal during retirement when the taxes are low or when there is a change in the current tax plan that could possibly be beneficial at that point of time.

As for the safety of investments is considered, both fixed annuities and certificate of deposits are equally safe and safer than all other investment plans available. It would be best for you to know that unlike a CD, fixed annuities are not backed by government institutions. Therefore, it would be best if you could invest in a company that has an A or a better rating with one of the renowned rating agencies. It would be best to invest in an insurance company that has a lesser return but a higher rating than take a risk with a lesser rating and higher returns. A certificate of deposit on the other hand is definitely more secure since it is backed by FDIC or the Federal Deposit Insurance Corporation. They has protected CD holders to an upper limit of two hundred and fifty thousand dollars each. If your bank fails and if it is unable to pay your deposits back, the FDIC will reimburse you to the mentioned amount.

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