CD-type annuities? Five year/5.1%; can take interest after 1st year and up to 10% thereafter?

Question

This is in an AM Best rated company (Aviva) A+. Is this a good deal? Minimum investment is $20K.

Answer 1

Why do you want an annuity?

Annuities are generally a waste of money for investing purposes (you are combining investing and insurance...the insurance part costs money...usually too much to justify the rest of the deal.

Although I would not advise a client to put their money in a 5 year CD at this moment in time (rates are too low to justify it), I see banks and money centers offering FDIC insured 5 year CD's for between 3.92% and 4.96%...E-Loan has a 6 year for 5.0%...so why waste your money on an annuity?

What is it you are trying to accomplish here?

Answer 2

Its a great idea if you are nearing 59 1/2. Fixed annuities dont have the fees that variable annuities have. They are similar to CDs but they offer tax deferral of the gains. But if you arent 59 1/2 when you take the money out after 5 years then you have to pay a 10% penalty. It's a great safe investment for older people who dont want to risk their investment and are looking for tax deferment and are considering annuitizing it after the 5 years is up and turning it into a stream of income.

You'll get better long term returns in a mut fund.

Answer 3

based upon what your individual goals are, this type of investment might be good for you.  You can get better rates out there currently.  I think allstate has 5.25 for 5.  Either way, buying fixed annuities is like shopping for cd's at the bank.  Call a bunch of people and find out who has the best one.

Answer 4

Are you taking it out for someone else to aid in their support? Why would you want an annuity, unless you don't trust yourself?

Consider a nice dividend paying stock that pays better than  their peers. Take a look at GXP, PFE or BAC for their dividend yields and remember the lower tax consequences.