Certificates of deposits, aka CDs have long been a stable part of most peoples overall investment portfolio. Why? Because regardless of whether the economy or market went was up or down you knew that your investment was ok.
People want a level of safety that a CD offers, with a decent amount of income that they can count on every month. But they also want the freedom to take their money elsewhere without penalty should they find an investment that pays them more. It's that peace of mind that allows them to stay comfortably retired. So, it's not so much that people were looking for 'safe' as it was more the 'guaranteed' return of principal with more choices and more control.
Unfortunately or fortunately, times have changed as CD rates have continued to come down over the years. Rates have inched up about 0.5% since Trump’s presidential victory on expectations of higher growth and inflation. However, rates continue to fluctuate and will likely be a guessing game for the most part. So, let's talk alternatives...
Benefits of an Annuity
Annuities, as many investors know, are somewhat controversial insurance products generally meant for retirement. In exchange for an up-front premium, you get a steady income, fixed or based on investment returns. While there's no tax deduction on money put into an annuity, investment gains are tax deferred until they are withdrawn, with all payouts taxed as income as with an individual retirement account or 401(k).
Certificates of deposit are safe but stingy, paying only 2.5 percent or so even if you're willing to tie your money up for five years. But some financial advisors suggest an alternative for investors willing to lock money up: a short-term fixed annuity.
"Fixed annuities generally offer 35 percent higher rates than CD rates in all economic eras," says Samuel Rad, an instructor at UCLA and a planner at Affluencer Financial in Los Angeles. "Currently, investors can find five-year annuities paying about 3.25 percent a year, beating the five-year CD substantially", says Eric Heckman, a planner in San Jose, California.
Equity Indexed Universal Life
What Makes the EIUL So Attractive
Equity Indexed Universal Life Insurance (EIUL) is a policy that provides an immediate death benefit and an investment plan. The single premium to fund this policy is partly allotted to an index crediting strategy on the market WITHOUT being IN the market, from which the policyholder can eventually take a loan.
Equity-indexed universal life policies have some definite advantages. Unlike other tax-sheltered investments, there's no contribution limit on an insurance policy. This makes them an ideal home for a financial windfall, or unusually high short-term earnings. The funds grow without taxation until you withdraw them. If you die prematurely, the investment growth becomes part of the policy's death benefit. It is paid out to your beneficiaries without the expense and time involved in probate. The risk-free investment potential of an EIUL is also alluring to anyone who's lost money on the markets.
Additional features include:
No surrender fees
After 1st year 10% free withdrawal option
Underwriting is 12 questions which I have attached
Can write up to age 85
Chronic Illness triggers 2% payout principle and interest per Month if you qualify.