Annuities compared to Bonds —


This is a common debate by Brokers.  But as you can read in this White Paper, their recommendation may be biased to what they sell.
When an investor is looking for conservative safe places to place money, the broker will normally offer the Bonds that he represents.
I have a different position. That as you will see on page 11, Chart 6,  provides a greater benefit.
Bonds values will vary if you want to sell them before the Term Date.  Would you like a 30 year term at 2.5% ? I certainly hope not.   You may receive some interest in the payments. However as interest rates rise, which they are doing. Your Bond Value at a lower rate bcomes less valuable if you wish to sell it. (( It’s called Discounting ))
The Basic Fixed Annuity is like a Banks’ CD.  Annuities, Like Bonds, can be lattered for different maturity dates. Providing rates that keep ahead of the inflation rate of 3% per year.  The interest earned is never lost.

How do you describe a basic Fixed Annuity?

If you understand the basic CD concept:

Money is placed for a specified time and specified interest rate.

At the end of the time, you walk away.

Better benefits.

The Annuity is Tax Deferred unlike the Banks CD or posibly a Bond.  At the end of the term, you may Walk Away or roll it over to a new annuity at the new prevailing rates.
You will need To hold a Bond to get the entire stated rate, until it’s term.  That makes it a Long Term Investment.  To resell the Bond, you can lose money in the secondary market.
A Banks CD or an Annuity is for a much shorter term.
As a side note- I am a very logical person.  I don’t make or recommend on emotion.   THE BANK CD.    They have been used by persons while they are in the bank.  “” Just let us move this from one account to the CD and you will be done””.   THAT is a recipe for failure.  The rates will be low, where you lose interest. It’s Taxable on monies that you 99.9% of the time you never use.
By comparison.  The Basic Fixed Annuity has a better interest rate. Tax Deferred until you take monies out.  If needed, you can take money out, but with a CD you need to surrender it.  They Can be rolled over as a non-taxable event. Plus other benefits not mentioned.
Follow this link to read what is known as a White Paper.  Mr. Pfau was one of my instructor’s while studying for the RICP®.   A person for whom I have much respect.   The article may be a bit technical, but you will understand it.   The White Paper was provided by Pacific Life Insurance Company

Pacific Life, Annuities, Bank CD, CD, Interest rates,