Finding safe harbors for your money Last month I talked about I bonds. These are offered by the federal government for investments of up to $10,000 annually. The current interest rate is 9.62%. Since a lot of people are asking about conservative investment options, I figured I’d cover an often-misunderstood product this month.
Annuities – safe or silly? Rising interest rates are tough on borrowers, but tend to improve savings’ returns. There are relatively safe places to park cash if you don’t need it for 3-5 years. These include the Multi-Year Guaranteed Annuity (MYGA), currently paying 3.8%.
FINANCIAL FIGURES By Michael Shelton Executive Summary: Whether an annuity is a smart investment for you depends on your personal financial situation.
Annuities have some similarities to CDs, but differ is in their taxed deferred status on 1099 interest. Unlike CDs, which are backed by the FDIC, annuities are protected by the Bureau of Insurance. Insurance companies are generally more secure than banks. The Federal reserve sets the limit on how much a bank is required to keep on hand; insurance companies tend to keep more to cover liabilities and risk. The top three insurance companies usually have a better credit rating than the United States of America. CPAs and others who tend to throw mud on annuities do so because some people invest already tax deferred dollars into annuities inside IRAs. IRAs are already tax deferred. To them, it doesn’t make sense to safe harbor money in an already tax advantaged account.
What are Annuities? Insurance companies are the only ones who can create annuities. Different firms offer varying terms and payouts. Shop rates just like you would with banks. You are checking to see if you bank rates are competitive, right?
24
t NOVEMBER 2022 / vbFRONT.com