Conservative Savings… or Lifetime Retirement Income?

MONEY MATTERS:

Conservative Savings…

or Lifetime

Retirement Income?

By: Kyle Lum

In uncertain times, sound financial decisions matter more than ever. When it comes to securing guaranteed retirement income, it’s important to base your decisions on a clear understanding of available products. Since many people turn to both deferred fixed annuities and certificates of deposit (CDs) for stable returns, it’s helpful to know the differences between the two.

First and foremost, a deferred fixed annuity is a conservative retirement vehicle, while a CD is designed to be a savings vehicle. Deferred fixed annuities can help you accumulate and protect assets until you are ready to receive them as guaranteed income during retirement–and many offer the option of guaranteeing retirement income for your lifetime. CDs, by contrast, offer a conservative way to save and preserve assets when your investment horizon (the amount of time you expect assets to be invested) is relatively short. CDs do not offer a guaranteed lifetime income option.

While both vehicles are considered conservative, they reduce risk in different ways. CDs are generally backed by banks and currently are insured for up to $250,000 for each depositor by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).

Fixed annuities are guaranteed–with no maximum–by the issuing insurance company. They are not FDIC insured. Be sure to ask your financial professional about an insurance company’s financial strength ratings if you plan to purchase an annuity, because payment of lifetime income is contingent upon the claims-paying ability of the issuing company or companies.

There are other important differences as well, involving income tax treatment, early withdrawal options, and other important factors. The best way to make a good decision when planning for retirement is to work with a trained, trusted financial professional to choose products that best meet your retirement income objectives and investment needs.

Annuity products are issued by Massachusetts Mutual Life Insurance Company (MassMutual) and C.M. Life Insurance Company. C.M. Life Insurance Company, Enfield, CT 06082, is non-admitted in New York and is a subsidiary of MassMutual, Springfield, MA 01111-0001.

Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company, Enfield, CT 06082.