The Great Recession and mortgage crisis that followed has led our economy to historically low interest rates. While that's good news if you want to borrow money, it's horrible news if you want a reasonable rate of return on your retirement savings.
For those who want to earn more than they're getting with a bank CD but still want the peace of mind of a safe investment, an annuity from an insurance company provides a higher-paying alternative.
It's easy. Banks make money by loaning your money out at a greater rate of interest than they pay you on your deposit. With historically low interest rates, banks have very little margin to work with leaving you with a minimal return. At the end of the year, Uncle Sam taxes your small earnings and you're left with even less.
Insurance companies make money by pooling your money to manage long-term investments (like government and corporate bonds). A longer investment horizon allows insurance companies to manage their risk more effectively providing typically greater returns than bank CDs. Since earnings are tax-deferred, it's not unusual for annuities to earn effective rates 3%-4% higher (or more) than a bank CD.
To learn how Fidelity Estate Insurance Services can provide a safe alternative to your low-paying bank CD, contact Elsa Cuevas at (619) 297-3200 for an appointment with one of our Retirement Planning Specialists.
Fidelity Estate Insurance Services (FEIS) is a California insurance agency license #OB93630. The FEIS website does not represent an offer of or a solicitation for insurance in any state/jurisdiction of the United States or any country where the firm is not licensed. FEIS provides advice and makes recommendations based on the specific needs and circumstances of each client. Clients should carefully consider their own investment objectives and never rely on any single policy illustration or marketing piece to make decisions. FEIS is not an investment advisor or broker dealer and does not offer tax or legal advice. Please consult your tax adviser or legal counsel for assistance with your specific needs. Copyright 2012 Fidelity Estate Insurance Services. All rights reserved.