Quick Tips On Certificates of Deposit With Gary Garrison
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Updated: September 18, 2012
The term rollover simply means buying a certificate of deposit as another one you own matures, and then placing the maturing certificate of deposit money into the new one.
October is one of the two busiest months when certificate of deposit account rollover activity increases. Rollover or not, return rates on certificates of deposit are at an all-time low right now.
When your CD matures you can do any of the following:
Roll over into a new CD. You're locked in to the market rate at the time of your purchase.
Invest in the equity markets, like stocks or stock based mutual funds. This carries potentially higher returns, but greater risk.
Invest in fixed annuities, where the returns are potentially lower than stock market investments, but give higher yields than CDs without the risk of equity investments.
Fixed annuities offer more options for investors than certificates of deposit. Depending on how they're set up, fixed annuities can offer higher return rates than CDs. And that interest is tax-deferred until the investor decides to make a withdrawal, as opposed the rigid maturity that CDs carry. A fixed annuity can be set up with a variety of maturity timetables and adjusted according to the investor's situation and needs. Some annuities carry the option of upside market participation with no downside risk--which is not an option with CDs. Last but not least, annuities have the availability to access some of your principal before the maturity date unlike a Certificate of Deposit.
Fixed annuities are not FDIC insured as CD's are, but they are guaranteed by the Insurance Company that issues them. Also, each state has a guarantee fund, that if the insurer were ever to go bankrupt, the state guarantee fund would step in and assure that you get the full value in your annuity. But overall, fixed annuities are a good choice for investors who want to minimize risk in their portfolio. Working with a financial consultant who can address your situation will make a big difference.
October is one of the two busiest months when certificate of deposit account rollover activity increases. Rollover or not, return rates on certificates of deposit are at an all-time low right now.
When your CD matures you can do any of the following:
Roll over into a new CD. You're locked in to the market rate at the time of your purchase.
Invest in the equity markets, like stocks or stock based mutual funds. This carries potentially higher returns, but greater risk.
Invest in fixed annuities, where the returns are potentially lower than stock market investments, but give higher yields than CDs without the risk of equity investments.
Fixed annuities offer more options for investors than certificates of deposit. Depending on how they're set up, fixed annuities can offer higher return rates than CDs. And that interest is tax-deferred until the investor decides to make a withdrawal, as opposed the rigid maturity that CDs carry. A fixed annuity can be set up with a variety of maturity timetables and adjusted according to the investor's situation and needs. Some annuities carry the option of upside market participation with no downside risk--which is not an option with CDs. Last but not least, annuities have the availability to access some of your principal before the maturity date unlike a Certificate of Deposit.
Fixed annuities are not FDIC insured as CD's are, but they are guaranteed by the Insurance Company that issues them. Also, each state has a guarantee fund, that if the insurer were ever to go bankrupt, the state guarantee fund would step in and assure that you get the full value in your annuity. But overall, fixed annuities are a good choice for investors who want to minimize risk in their portfolio. Working with a financial consultant who can address your situation will make a big difference.
Comments
I'm glad Mr. Garrison brought attention to the great value of fixed annuities. Excellent interview, we blogged about it on AnnuityFYI.com
Burgess W.
September 19, 2012 at 12:56 pm
