| Key Features | Traditional Fixed Annuities | Certificates of Deposit |
|
| Fixed interest rate | Yes
Initial rate fixed for given time period; new rate set for each renewal period. | Yes
Initial rate fixed for given time period; new rate set if CD is "rolled over". |
| Appeals to conservative individuals | Yes
Principal value does not fluctuate with stock and/or bond market. | Yes
Principal value does not fluctuate with stock and/or bond market. |
| Tax-deferred interest | Yes
During accumulation stage. | No
Earnings currently taxable. |
| Highly liquid | No
Not during accumulation stage(except for free withdrawal amount, generally 10-15%). | Yes
Except for early withdrawal penalty(see next row). |
| Early withdrawal penalty | Yes
Surrender charges apply during early years of contract, and earnings withdrawn before age 59-1/2 may be subject to a penalty tax. | Yes
Not as heavy as fixed annuity; generally lose some interest if CD is redeemed prior to maturity. |
| Income options | Yes
Variety of income options, including lifetime payments, payments for a certain period of time, or systematic withdrawals. | Limited
Interest payments available in cash when credited to account, or accumulated for payment at maturity. |
| Avoids delay and expense of probate | Yes
If proceeds paid directly to named beneficiaries. | No
Unless held as "payable on death" or in trust accounts. |
| When Suitable | For longer-term financial goals, such as retirement. | For shorter or itermediate term financial goals, such as vacations, house down payments, or college expenses expected within 5 years. |
