Fixed-Rate Annuity or Certificate of Deposit?

Annuities are commonly used to establish a steady stream of income in retirement. Panchenko Vladimir/Shutterstock

Stocks seem overpriced today, you think. So, you want to move some of your investments into safer places. Safer in the sense that your principal amount is protected, even if it means you only earn 4 or 5 percent. Peace of mind—that your money is safe and secure—is worth a lot!

You can consider money market funds, certificates of deposit, or annuities. You can even look at short-term U.S. Treasury bills. While all these are paying only single-digit interest or returns on your investment, lately we are seeing slightly higher fixed rates on certain annuities than certificates of deposit.

What Are Annuities?

An annuity is a contract between a buyer and an insurance company. It provides the buyer with a regular series of payments in return for a lump-sum payment. Annuities are commonly used to establish a steady stream of income in retirement.