What Factors should I consider between a Fixed Annuity and a CD?
1. Liquidity
If you need access to the funds in a CD prior to its maturity date, you may pay an interest penalty ranging from 30 days to six months of interest.
A fixed deferred annuity also provides you with access to your money, however, withdrawals taken during the surrender charge are generally subject to surrender charges. Most companies will allow you to withdraw a portion of your deferred annuities account value, usually 10% each year, without a company-imposed surrender charge.
Once the surrender charge has expired, you can access your money at any time without surrender penalties. It’s important to remember that such withdrawals will be taxable and, if made prior to age 59 ½, may be subject to an additional 10% penalty.
2. Short term accumulation
When deciding between a CD and a fixed deferred annuity, the amount of time you need to save should be a key factor. For short term goals, such as a down payment on a home or a new car, a CD may prove to be a better choice. CD maturity periods can be as short as one month or as long as several years.
3. Long term accumulation
A fixed deferred annuity is designed to help you accumulate money for retirement or to protect the funds you’ve already saved once you’ve reached retirement. The fixed deferred annuity is usually more flexible for accessing your money later.
1035 Exchanges for Fixed Annuities
Your existing fixed, variable, and indexed annuities can be easily exchanged into a new annuity contract through a process known as 1035 exchange. This is a particularly popular approach to maximizing the value you get from your annuities since simply withdrawing the funds prior to age 59 ½ incurs an IRS penalty. Exchanging one annuity for another maintains your money’s tax advantage status. Here are some key 1035 annuity exchange considerations.
• Make sure you’re getting more value out of the exchange. For example, if you’re exchanging an existing fixed annuity for a new fixed annuity, the new fixed annuity should be paying a higher interest rate.
• Be careful of surrender charges. Most fixed, variable, and indexed annuities have a surrender charge. This is a certain number of years at the beginning of the annuity where you’ll get charged (typically 1 to 10%) if you surrender (withdraw your money).
• Evaluate your existing annuities income options. All annuities offer the ability to annuitize or turn your money into guaranteed income. Consult your insurance company to find out what annuitization rates they offer for your existing annuity and compare those to current and new dictation rates.

Thought for the Week
Remember, when the peacock struts his stuff, he shows his backside to half the world.