A wholesaler just called … scratch that. Another annuity wholesaler just called.
For the right client these days (early August 2019 stock market correction and 5-year treasury at roughly 1.55%), a fixed 5-year annuity with interest rate return greater than 3.5% these days is a pretty good deal for some people. If you need to use some of the funds over the next five years, you can draw 10% per year. Or let the money grow.
That’s a better return than most banks. DISCLOSURE: The interest gains are deferred until withdrawn, then taxed first as income when withdrawing the funds, and there is no FDIC insurance. The annuity is backed by the insurance company that issues the financial product.
Best approach: Consult with an expert, who is willing to share all the details, including his or her compensation (motivation) in placing the annuity. As with bank CD’s and most financial instruments, someone is making money on your money most of the time. However, net return is what we’re after for funds that need to be protected from stock and bond market volatility over a certain period of time.
There are much more complex annuity products than fixed annuities. Work with someone that you trust and are comfortable discussing financial concepts with, so that you feel confident about the decisions your making. Take your time and stay focused on your goals and what you want. Be cautious before changing your initial direction and moving to any other annuity product than a fixed rate annuity with a 5-year surrender period or less.