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Should I invest in CDs or annuities?

No, unless you want to waste money.

In CDs the interest won’t even beat inflation and your principal will never grow (unlike stocks where you get dividends and growth, with CDs you get poor interest and no growth).

Annuities look good on a surface but they in fact deprive you of off the stock market growth. What annuities do, is that they tell you that you will get a guaranteed 10% annual return and 0% loss (they guarantee you no loss). But if you look how markets work, you find out annuities are a rip off. The markets usually grow 29% or 30% a year. And time to time they have a severe 20% to 50% bear market (that’s why over time, if you average it, the average annual growth will be 12% only). But this doesn’t take into account time. It only accounts for the percentages. If you see how long the market goes up 20% – 30% per year and how long they go down 20% to 50% per year, you will see that the market can go up 30% for 10 consecutive years while down 50% for 2 consecutive years. And here is the rip off. The annuity company will tell you that for those two years you will not get those losses. But for the next 10 years, you will only get 10% upside while the annuity will reap the remaining 20% .
 

Let’s look at example:
 

Let’s say, you bought an annuity in 2005. Here is what you would get:
 

Dec 31, 2019 – 29.44% – you get 10% – annuity gets 19.44%
Dec 31, 2018 – 20.49% – you get 10% – annuity gets 10.49%
Dec 31, 2017 – 16.21% – you get 10% – annuity gets 6.21%
Dec 31, 2016 – 9.27% – you get 9.27% – annuity gets (0.73%)
Dec 31, 2015 – (15.42%) – you get 0% – annuity gets (15.42%)
Dec 31, 2014 – 2.11% – you get 2.11% – annuity gets (7.89%)
Dec 31, 2013 – 15.82% – you get 10% – annuity gets 5.82%
Dec 31, 2012 – (0.51%) – you get 0% – annuity gets (0.51%)
Dec 31, 2011 – 12.41% – you get 10% – annuity gets 2.41%
Dec 31, 2010 – 51.76% – you get 10% – annuity gets 41.76%
Dec 31, 2009 – 242.54% – you get 10% – annuity gets 232.54%
Dec 31, 2008 – (77.52%) – you get 0% – annuity gets (77.52%)
Dec 31, 2007 – (18.81%) – you get 0% – annuity gets (18.81%)
Dec 31, 2006 – 16.73% – you get 10% – annuity gets 6.73%
Dec 31, 2005 – 19.27% – you get 10% – annuity gets 9.27%

Out of these years, there were only 4 occurrences where annuity would grow at zero growth rate, 9 occurrences where the market grew more than 10% and 2 where it was a bit less that 10%. Just look at December 2009. The market went up 242.54% but your annuity would pay you only 10%. The remaining 232.54% would be a nice gain tot he annuity company using YOUR money. And this is just a 15 years long example. Imagine you would do this for 30 years. Add fees to it and it will not be you who would be rich…





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