CDs are typically available with terms from one month to five years. Furthermore, annuity issuers have a good track record, and economists consider annuities to be safe, especially if you choose a highly rated insurer.įixed-rate annuities offer terms from two to 10 years. Unlike CDs, fixed annuities are not FDIC-insured, but they are covered by state guaranty associations, which provide some protection up to certain limits. The IRS will waive the penalty if you’re permanently disabled. So, don’t buy a fixed annuity if you may need the money before 59½. If you receive interest from your annuity before age 59½, you’ll owe the IRS a 10% penalty on the accumulated interest earnings you’ve withdrawn as well as ordinary income tax. With most CDs or annuities, if you choose to receive interest payments instead of reinvesting them, you won’t be penalized.
However, many fixed-rate annuities let you withdraw up to 10% of the value annually without penalty some are more restrictive. Withdrawals from annuities larger than allowed by the contract before the surrender period has ended will result in early-surrender charges.
