Quick 2009 vs. 2010 Annuity Rate Comparison
Last year we had plenty of 5% annuities available and annuity sales were at an extreme high. CD rates at the same time were at 4%. See the table below;
| 2009 Rates | Rate |
| Annuity | 5% |
| CD | 4% |
| Difference in Rate | 25% in favor of the annuity |
As you can see from the above, annuity rates still were 25% higher than CDs last year and many clients jumped into their annuity with both feet. Now a year later we see the following;
| Current Environment | Rate |
| Annuity | 2.9% |
| CD | 1.82% |
| Difference in Rate | Over 37% in favor of the annuity |
The difference in rates between these two vehicles is dramatically different today. Economists stipulate that the interest rate environment will remain flat until 2012. But, assuming we ignore economists, what would rates have to climb to in order to justify waiting today?
Today we can get 2.9% x 5 years guaranteed with an annuity and without the power of compounding, this equates to 14.5% over 5 years
- If we wait a year we would need to yield 3.62% on a 4 year annuity to equal 14.5% (a 54% increase off today’s 4 year annuities)
- If we wait 2 years we would need a 4.83% rate on a three year annuity to equal 14.5% (a 193% increase off today’s 3 year annuities)
