Why More Near-Retirees Are Turning to Fixed-Rate Products in the Volatile {{current_year}} Market

Frequently Asked Questions

• What Is an Annuity?
  • An Annuity is a contract between up to four parties:
    • Owner: The owner is the person who buys the annuity.
    • Annuitant: The annuitant is the one who gets the benefit payments and is often the same as the owner.
    • Beneficiary: The beneficiary receives death benefits payable under the annuity contract, if applicable.
    • Issuer: The issuer is the company that issues the annuity, such as an insurance company, and pays benefits when the time comes.
  • Payment amounts in the distribution phase are based on the annuitant’s life expectancy.
• What Are the Benefits of an Annuity?
  • One of the benefits is that annuities can be safe financial instruments for people worried about market or longevity risk. An annuity can provide a predictable income stream — you’ll know how much, when and how long to expect it. Those seeking tax deferrals can also benefit from annuities that accumulate tax-free, with only distributions in retirement being subject to income tax.
• How Are Annuities Commonly Distributed?
  • Fixed amount: You receive payments in a fixed amount until you have no money left in the annuity or you request them to stop. This option does not provide guaranteed income for the rest of your life, but it does give you a predictable income stream.
  • Fixed period: You receive payments for a specific length of time, such as 10 or 20 years. If you die before the period ends, your beneficiary can receive the rest of the contracted payments.
  • Joint and survivor life: You or your survivor receive guaranteed payments for the rest of your lives. With this structure, you receive the payments until your death. At that point, your survivor receives the payment you agreed to for the rest of their life.
  • Life only: You receive guaranteed payments for the rest of your life. This doesn’t mean you automatically get back all of the money in the annuity, but you’ll have a regular payment that you can count on. Your life expectancy plays a factor in how much you’ll receive — the longer you’re expected to live after payments start, the smaller they’ll be.

• What Are CD Accounts?
  • Certificate of deposit accounts, also known as CDs, are low-risk investments that allow you to earn interest on your funds risk-free, as long as you keep your money in the account until it matures. CDs typically offer higher interest rates than savings accounts, and unlike savings accounts, the rate you receive when you open the account is guaranteed.
• How Do I Find the Best Bank CDs?
  • When choosing a CD account, pay attention to not only what the best CD rates are, but also the length of the term and the minimum deposit required. Note that certificate of deposit rates are typically higher the longer the term is, so the best 1-year CD rates will likely be higher than the best 6-month CD rates. In addition, the highest CD rates might require a high minimum deposit.
  • The best CD for you will depend on how long you are willing to keep your money in the account and how much money you have available to deposit in the account. If your goal is to accrue a certain amount of money in a fixed period of time, you can use any of the numerous online CD calculators to determine how much you need to deposit at what CD interest rate and for how long to achieve that goal.
• What Type of CDs Have the Highest Rates?
  • If you’re looking for an especially high-interest CD, you might consider a specialized CD called a jumbo CD. Jumbo CD rates tend to be higher than those of a traditional CD, but you will need a much larger deposit to open one — typically around $100,000. Keep in mind that the FDIC ensures accounts up to $250,000, so if you deposit more than that into a jumbo CD, you are exposing yourself to more risk.
  • Even if you don’t have the funds to open a jumbo CD, you can still benefit from the current CD rates at the deposit size and term length that’s best for you.