Medway & Millis October 2019

Page 22 Medway & Millis Local Town Pages www.localtownpages.com October 2019
Comparing Ultra-Safe Investment Options
With savings account rates at
historic lows, many retirees and
other savers are uncertain where
to go to stretch their dollars,
while keeping their assets as safe
as possible.
Options include certificates of
deposit (CDs), money market accounts,
U.S. Treasury securities
and fixed-deferred annuities.
How do they compare? Here’s
an overview:
Certificates of deposits (CDs):
Issued primarily by banks, a certificate
of deposit (CD) is a savings
vehicle with a fixed maturity
date and a fixed interest rate that
is insured by the Federal Deposit
Insurance Corporation (FDIC)
for up to $250,000 per CD
holder. CDs are typically used
for short- to medium-term savings
needs. They typically offer
a higher investment return than
traditional savings accounts, but
lower rates of return than fixeddeferred
annuities.1
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Money market accounts: A
money market account usually
combines the flexibility of a traditional
savings account with a
higher interest rate and the ability
to write a limited number of
checks. Money market accounts
seek to maintain a stable $1 unit
value and because of their stability
are often used as “parking
places” for liquid assets. These
accounts also are backed by the
FDIC, and typically require a
larger minimum balance than a
savings account.2
Treasury securities: Treasury
securities are essentially loans
to the federal government, and
come in three forms. T-Bills offer
the shortest terms—four, 13, 26,
and 52 weeks. T-Notes occupy
the middle, maturing in two,
three, five, seven, or 10 years,
while T-Bonds, known as “long
bonds,” offer a 30-year maturity
date and will pay interest on a
semiannual basis. Treasury securities
rank among the safest
investments, because they have
the backing of the “full faith and
credit” of the U.S. government
as to the timely payment of interest
and principal. However,
they are subject to inflation and
their values fluctuate in response
to changes in interest rates.3
Fixed-deferred annuities: A
fixed-deferred annuity offers
some of the benefits of a CD,
including the ability to generate
interest safely, while also giving
the holder the ability to delay
the payment of income taxes
on money earned on the annuity.
Their aim is to return your
principal investment to you with
interest.
Fixed-deferred annuities are
typically used for long-term funding
needs related to retirement.
However, access to the funds in
an annuity is limited, and fixeddeferred
annuities involve insurance-
related fees and charges.
They are issued by insurance
companies and are not backed
by the FDIC. Therefore, the financial
stability of the issuing insurance
company is key. You can
evaluate the financial strength of
an insurance company by checking
its ratings by independent
sources, which include Moody’s,
A.M. Best, Standard & Poor’s,
and Fitch.4
This educational, third-party article
is provided as a courtesy by Michael T.
Damon Financial Adviser, New York
Life Insurance Company. To learn
more about the information or topics
discussed, please contact Mike Damon
at (508) 321-2101.
1
Tony Armstrong, “What is a CD
(Certificate of Deposit),” Nerdwallet,
February 24, 2017, https://www.
nerdwallet.com/blog/banking/cdcertificate-of-deposit/
2
“Money Market Account,” Investopedia,
http://www.investopedia.
com/terms/m/moneymarketaccount.
asp 3Mark P. Cussen, “Introduction
to Treasury Securities,” Investopedia,
http://www.investopedia.com/articles/investing/073113/introductiontreasury-securities.asp
4
“Buyer’s Guide to Fixed Deferred
Annuities,” National Association of
Insurance Commissioners, 2007,
http://www.naic.org/documents/
prod_serv_consumer_anb_lp.pdf
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