Banks vs. Annuities: Which Will Grow Your Money Faster?

You have many ways to invest your money. Some people choose to put their money in the bank, taking advantage of services like high-interest savings or certificates of deposit (CDs). Others choose to purchase fixed or variable annuities with an insurance company. Explore the potential of variable annuities! Click here to visit this website and discover how to diversify and optimize your retirement portfolio.

While both can help you grow your wealth and secure a better financial future, which can help you do it faster?

Interest Rates

Generally, annuities have higher rates than CDs. A CD from your bank has an interest rate largely determined by decisions made by the Federal Reserve. Meanwhile, annuities get their interest rate from a figure set by the insurance company in the contract.

There are various types of annuities, and they can have different interest rates. Variable annuities, for instance, change in value based on the performance of an underlying portfolio or subaccount.

Annuities offer a higher interest rate, but CDs benefit from locking in a rate for a defined period.

Taxation

Another thing to consider is taxation. With CDs, you will pay taxes on the interest you earn every year. It doesn't matter if you can access the money in your CD. You will pay taxes on the interest.

That's not the case with annuities. Pre-tax money you contribute to annuities is tax-deferred. You only pay taxes on the growth when you're ready to withdraw. That can affect the value of the investment, especially when planning for retirement.

Which Investment Vehicle Grows Faster?

If you're worried about speed, bank products may be the solution. But if you want long-term value and growth, annuities are the way to grow.

Many financial experts consider bank products like CDs a smart choice for short-term growth. You can take advantage of interest rates when they're high, locking them in to experience fast growth over several years.

But annuities are the better vehicles for tax savings and long-term growth. The original amount invested can grow during accumulation, and you benefit from guaranteed payments later. Because interest rates are higher, your money goes farther. Plus, you can choose the type of annuity that is right for your risk tolerance, making these investments safer and more reliable.

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