This is an easy way to compare the various options that investors have available to them.
Compare Investment Options
SECONDARY MARKET ANNUITIES PRIMARY ANNUITIES EQUITIES/ REITS/ MUTUAL FUNDS BONDS- TIPS, US TREASURY, AND CORPORATE MUNICIPAL BONDS CERTIFICATE OF DEPOSIT
Is this option affected by market fluctuations? No. The benefit payments are fixed and not subject to market fluctuations. Depends on contract. Fixed, GLWB, and Immediate Annuities no, Variable, yes. Share price and return will vary, depending on market conditions. Principal value, yes, yields, no, if held to maturity. Yes. Value affected by interest rate fluctuations and bond call options. Yield depends on interest rate based on market conditions. Rates may increase or decrease.
Can this option provide a stable, lifetime income? Payment designs can provide a dependable and predictable income stream based on life expectancy. Can be outlived without proper planning Yes. Income or return will depend on the type of annuity contract. Higher degree of investment risk means potential for higher or lower returns. Yes. Provided sufficient bonds are purchased, income from bonds can provide stable income. Subject to valuation fluctuation and issuing entity credit. Bond must be held to maturity to receive the face value of bond. No. Pays a fixed rate that accumulates for duration of CD. Relatively low returns and penalties for early withdrawals. Inefficient for providing adequate income stream.
Is there a guarantee with this option? Yes. The annuity issuer guarantees payments to be made based on claims-paying ability. SS are senior corporate obligations above regular annuities. Yes. The annuity issuer guarantees payments to be made based on claims-paying ability. No. Share prices and returns will fluctuate with investment performance. No. Bond yields guaranteed subject to issuing company and only if held to maturity, principal value may fluctuate with market rates. Interest is guaranteed for initial investment period. Afterwards, may be subject to change up or down. Yes. FDIC insures deposits up to $250,000. The issuing bank guarantees amounts over $250,000.
What are the costs and fees associated with this option? No additional cost other than purchase price to the buyer. No additional cost other than purchase price to the buyer. Management and expense fees are deducted from returns. Others fees may be applicable. Issued at face value Issued at face value. None. Penalty for early withdrawals.
Will this option keep pace with inflation? A fixed cost-of living adjustment (COLA) contract may be available. Depends on specific of contract. COLA protection may be available. Total return will depend on performance of underlying securities. TIPS, yes, Corporate and Treasury, subject to maturity dates and replacement yields Does not provide hedge against inflation. Unlikely. CDs are considered a low risk/low-yield investment.
What type of securities/insurance products support payments? A fixed annuity contract issued by a highly rated life insurance company. Backed by the claims paying ability of the Issuer, and Insured by state Insurance Guarantee funds, amounts vary by state. Investment company operated fund, pooling assets and investing in equity securities or real estate. Subject to the claims paying ability of the issuer. Debt instruments issued by state or local government. Debt instrument issued by a bank. Maturity options range.
Can I make changes to this option after I select it? No. The benefit payments are fixed and not subject to change. Generally, benefits are pre-defined and subject to age and surrender charges. If monies are withdrawn or moved, charges, fees and taxes may apply. Yes. If sold/redeemed prior to maturity, value subject to market conditions. May result in gain or loss. Yes. If sold/redeemed prior to maturity, value subject to market conditions. May result in gain or loss. Yes. May be subject to penalty for early withdrawals.
What are about inheritance? Fixed income payment stream will pass to your heirs according to your will Varies by contract- generally, death benefit or account value passes to heirs Pass to your heirs with the rest of your estate Pass to your heirs with the rest of your estate Pass to your heirs with the rest of your estate Pass to your heirs with the rest of your estate
What are the tax consequences? Principal grows tax deferred and compounding, income is fully taxable Principal grows tax deferred and compounding, income is fully taxable Taxes must be paid as income is earned and distributed. Interest Income is fully taxable Generally, interest is exempt from federal income tax. May also be exempt from taxes in state of issue. Earnings are fully taxable.