Tag Archives: CDs

Financial Perspective: Different types of bank certificates of deposit

3-bottom, Finances, Local Business, ,

By Dave Stanley
Integrity Services Financial, LLC

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The average consumer may not be aware of some more attractive CD terms as they are typically reserved for large investors and therefore offered to the bank’s wealthiest clients. Some types of CDs are not provided directly by an issuing bank but are made available through financial professionals licensed to sell the specific CD instrument in question. That is why investigating the certificate of deposit alternatives with a financial professional is one of the essential fact-finding missions in which a conservative investor can engage.

Traditional CDs: Traditional certificates of deposit are sold directly by banks to the general public. The purchaser agrees to hold their funds for a specified period with the bank to attain a fixed return on their investment when the period ends, usually referred to as the certificate’s “Maturity Date.” If the depositor wants to withdraw funds before the maturity date, penalties are generally applied, and this is pretty much the only way you can lose principal with a traditional CD investment.

Brokered CDs: Brokered certificates of deposit are sold through securities broker-dealers and deposit brokers rather than directly through the issuing bank. Brokers purchase the CD from the issuing bank on the investor’s behalf.

Market Linked, or Structured CDs: Market-linked certificates of deposit, also referred to as structured certificates of deposit, are a brokered type of CD offering the safety of FDIC insurance with more attractive interest rates than traditional CDs. They usually pay both a guaranteed interest rate and a variable interest rate, which is tied to a market vehicle such as stocks, bonds, commodities, or indices. Conservative investors find these desirable investments as the FDIC insurance minimizes risk to principal, and the higher interest potential dramatically reduces risk to losses due to inflation.

Deposit Brokers have been selling Market Linked CDs (MLCDs) in the United States since Chase Bank introduced them in 1987, but they were designed for wealthier investors and were out of reach to average investors. While today’s MLCDs are available for a minimum deposit of $1,000, many brokers may require a higher account size.

  

Bump-Up CDs: Bump-up certificates of deposit offer a lower initial interest rate than traditional CDs to investors but provide them with a one time option to “bump up” their rate if interest rates rise during the CD term.

 

Step-Rate CDs: Step-rate certificates of deposit are designed to “step” up or down to a predetermined rate at a certain point in the term of the CD based on specific circumstances.

  

 Callable CDs: Callable certificates of deposit are offered at higher than traditional rates to investors with the bank retaining the option to “call” the CD after a specified period.

 

And beware: your interest may be taxed annually as it is earned even though you will not receive it until your maturity date.

  

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: There is a secret about longevity, living a long time

3-bottom, Education, Local Business, , , ,

By Dave Stanley
Integrity Financial Service, LLC

“The secret is simple: The longer you live, the longer you live!”

What happens if you live longer than you expect? How do you make sure your funds last as long as you do?

Do you invest in stocks? Bonds? Keep your money in the bank? Increased life expectancy is extending the time needed for our retirement funding, making sure our money lasts as long as we do has become the new “mantra” of the Baby Boomers.

Many financial planners are turning towards products that remove the risk of the longevity problem, allowing an insurance company to bear the longevity risk, annuity companies issue and manage annuity products.

Many types of annuity products are available, even those who pay interest (yield), which are similar in structure to bank CDs. However, the real benefit of annuities is the income provision, income that can pay for any period, even a lifetime.

The question often asked is “What happens to the money in an annuity if a person dies early? Does the annuity company keep the money?”

The answer is no; it is an old wives’ tale that insurance companies profit from an early death. The unused portion of the annuity is merely refunded to the named beneficiary. Funds are always accounted for, and it is the law.

Consider letting an insurance company be responsible for your important long-term safe and secure retirement income. Safety and security is their first and foremost goal.

One last tip: shop around for the best rates; rates can often be based on age, and numerous options exist.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.