YRA’s Lynn Toomey featured in US News & World Report
Lynn Toomey, co-founder of Her Retirement was recently featured in an online US News & World Report report regarding alternative investment options to Certificates of Deposits.
US News & World Report contributor Jeff Brown takes a closer look at investing in fixed annuities over other options such as Certificates of Deposits.
Certificates of deposit can be considered safe but notoriously stingy as currently there are five-year annuities paying about 3.25 percent a year, beating the five-year CD at 2.5 percent, a difference of about 35 percent.
Annuities do offer some different forms of flexibility, such as immediate annuities, which pay monthly income for life as soon as they are purchased. The other option is a deferred annuity, which also pays for life but after a delay of a set number of year, and with the delay comes a more generous return.
Brian explains that five-year deferred annuities will pay a guaranteed rate of return for the duration of the contract. “The credited rate is typically higher than a CD of the same duration,” he continues. Most advisors will tell you that a five-year investment like an annuity are designed for retirement and is really best suited for people in their mid-50s and older.
“Any withdrawals of gains from a non-qualified annuity will be subject to tax at ordinary income tax rates and prior to age 59.5 will be subject to a 10 percent surtax,” Brian tells US News & World Report. “After age 59.5, all gains will be taxed at ordinary income tax rates, but the 10 percent surtax is eliminated. For these reasons, it’s imperative for individuals looking for liquidity to understand the tax implications.”
For more information on the possible advantages annuities have over CDs and the possible caveats of each type of annuity, check out Jeff Brown’s piece on US News & World Report.
To dispel some myths and misinformation about annuities, check out our Guide to Fixed Indexed Annuities
To learn more about the role annuities play in a retirement portfolio, read A Portfolio for a Changing Economy white paper
Also, check out: Why Ken Risher is Wrong on Annuities