Savings, CDs or an Annuity? Safe Options for Retirement Money

Where safe money can go

Keep enough in the bank for emergencies. For the rest, these are the usual choices.

Keep it in the bank

FDIC insured up to $250,000 per depositor, per bank, per ownership category, and easy to reach. Rates can fall at any time, and interest is taxed every year.

CDs and Treasuries

Lock in a rate for a term. Simple and safe, but the interest is taxed each year even if you don't spend it, and the rate can be lower when it's time to renew.

A fixed annuity (MYGA)

A multi-year guaranteed annuity locks in a rate for a term, often 3 to 10 years. Interest grows tax-deferred until you take it out, and many let you withdraw a portion each year, often 10%, without a charge.

A fixed indexed annuity

Interest is linked to a market index, with a floor of zero: no loss from market drops, and more growth potential than a fixed rate, though how much you'll earn isn't known in advance.

An income annuity

Turn part of your savings into a guaranteed monthly income for life. Part of each payment is a return of your own money, so only part of it is taxed.

Before you move bank money into an annuity

It isn't FDIC insured. An annuity is backed by the insurance company's financial strength, and by your state's guaranty association up to limits that vary by state. Check the insurer's rating.
Surrender charges. Take out more than the free amount during the term and a charge applies. Only use money you won't need all at once.
Taxes when you take it out. Interest is taxed as ordinary income when withdrawn, not as capital gains, and before 59½ a 10% penalty can apply to the interest.
An emergency fund comes first. Keep several months of spending somewhere you can reach any day.

Savings questions

Is a fixed annuity like a CD?

In some ways. Both pay a set rate for a set term. A CD is FDIC insured and its interest is taxed every year. A fixed annuity is backed by an insurance company, grows tax-deferred until you withdraw, and charges a fee for withdrawals beyond the free amount during its term.

What happens to an annuity when I die?

Most deferred annuities pay the remaining value to the beneficiaries you name, and with a named beneficiary that money usually passes outside probate. Income annuities depend on the option chosen: some stop at death, others continue for a spouse or refund what's left.

How much could my savings earn?

Rates change with the market and differ a lot between insurers and terms. The assessment gives a licensed professional what they need to compare current options for you.

See what your savings could pay you each month

Five quick questions, about a minute. Then, if it's useful, a free income review with a state-licensed professional.

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Free · No obligation · Educational only · Not tax advice