Financial Planning AnnuitiesCD vs. Annuity

This is financial adviser Patrick Munro talking
about CD's (meaning Certificate of Deposit) versus annuities. The basic difference between
Certificates of Deposit, they are bank issued instruments. You give money to a bank, they
give you a piece of paper or a Certificate of Deposit which bears an interest rate. Normally
you have to pay taxes.

Currently CD's are paying, at the time of this filming, about
3 1/2% in interest. If you have to pay taxes on that 3 1/2%, you are receiving a effective
yield after taxes of about 2.9. The problem with that is inflation. Meaning your gas and
your food and various other things is running about 5%.

Annuities, on the other hand, you
are able to give an insurance company, not a bank, but an insurance company, the same
amount of money, they'll give you an annuity certificate in return. Your money is then
tax deferred. Which means you don't have to pay taxes on the internal rate of return.
So normally you are able to get a higher rate of return than inflation offers. And the only
time you have to pay taxes on it is when you take the money out.

So I always don't participate
in Certificates of Disappointment, meaning CDs, but rather work with an insurance company
in an annuity and you will have a better financial future. This is financial adviser Patrick
Munro talking about the differences between Certificates of Deposit, CDs and annuities..