5 years is a long time...Right?
I am 53 years old and even for me at my tender age, 5 years seem to pass in a flash.
For example it is coming up on 4 years since we moved from the lovely little home office on Spruce St to our current location on Washington St. What a tremendous decision that has proved to be!
But back to my ramblings about time and 5 year periods, there is a point and I shall get to is shortly. When I first started offering annuities to clients the interest rates were around 8% or so, and those contracts even had a guaranteed minimum of 4%. I still have clients who enjoy that 4% guaranteed rate and I recently saw a client whose policy provided over 14% interest for the first year. Heady interest rates when compared with the rates of today.
Interest rates on CD's are at or very close to historical lows.
I see people everyday who have had CD's and when they mature they have just been rolling them over year after year without even comparing the rates at other local banks. Generally these CD's are for terms of between 9 to 18 months.
When I question folks about why they do not purchase longer length CD's, one of the most common reasons I hear is that they don't want to be locked into a long term account in case interest rates climb.
Folks, let me tell you if interest rates suddenly increase that greatly, you can always pay a small penalty and get those funds from the CD.
But now to the point of this article.
At Castell Insurance we offer CD style fixed annuities where even today we can offer you a 3% interest rate on a 5 year deposit. A fixed annuity is a contract with an insurance company where they state both what the interest is that you will earn and also the length of time they will guarantee that rate.
Yes, 5 years sounds like a long time, but look at your situation if you have been rolling CD's over and over and over these past years.
At the end of the 5 year period you can take all your money and interest elsewhere if you choose without any problems. However, if you rely upon the interest you can have the interest paid to you whenever you choose, even monthly.
So, if you have a CD maturing in the next few months and are disappointed at the interest rate offered by your bank upon renewal, please feel free to contact me and let's sit down and have a chat.
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