An CDSC annuity combines investment growth potential with insurance benefits, making it an attractive retirement planning vehicle. Like all investments, though, CDSCA annuities come with fees that could affect its final value; understanding these charges and how they operate can help investors better evaluate whether or not one meets their financial goals.
An annuity offers multiple withdrawal options that could make them the superior option for someone seeking income in retirement, while CDs have limited liquidity and offer only fixed interest rates throughout their term of contract. Furthermore, when investing in CDs through FDIC-insured accounts your principal will remain safe from loss.
Fixed annuities provide tax-deferred growth that can help supplement your savings or retirement portfolio, and guaranteed payouts that you can use to supplement current income. Unfortunately, their fees tend to be higher than other investments such as mutual funds or stocks – in order to minimize fees, it’s essential that you carefully read through an annuity’s fee schedule before investing.
When purchasing an annuity, it’s also important to take note of its surrender charge schedule – this shows what will be deducted if you withdraw funds within the first several years of the contract. This fee, known as contingent deferred sales charge (CDSC), helps discourage early withdrawals by helping providers recover initial costs more easily.
This fee will be assessed if you withdraw funds within an annuity’s surrender charge period, typically five to ten years from purchase date. When choosing an annuity, its surrender charge period should be taken into consideration as its length can have significant ramifications on long-term financial planning; shorter surrender charge periods offer greater liquidity while longer ones might suit those looking for retirement income growth opportunities.
Attracting liquidity riders can help eliminate or significantly decrease contingent deferred sales charges on an annuity contract, enabling you to withdraw a small percentage each year without incurring penalties or forgoing future payments – helping meet short-term needs without draining away savings in retirement. It is wise to speak with an annuity specialist when making this decision to ensure it suits you properly.