Principal protection strategies · Gulf Coast Alabama
Conservative options for money you cannot afford to lose
If market swings worry you, or your CDs are coming due, there are insurance-based options designed to protect principal from market loss. Each comes with trade-offs. Dr. Leon has helped Gulf Coast families weigh them since 1997.
Book a free strategy call (251) 206-7074ChFC® and RICP® designations · No cost · No obligation
The options
Three common principal protection tools
None of these is right for everyone. The right choice depends on your time frame, your need for access to the money, and your goals.
Bank CDs
FDIC insured up to applicable limits, with a fixed rate for a fixed term. Simple and short-term. Interest is taxed each year.
Fixed annuities (MYGAs)
An insurance contract that pays a guaranteed rate for a set number of years, with tax-deferred interest. Surrender charges apply to early withdrawals. Not FDIC insured.
Fixed indexed annuities
Interest is linked to a market index, limited by caps or participation rates, with a floor so index declines do not reduce your value. Longer commitments and more moving parts. Not FDIC insured.
Side by side
Bank CDs and fixed annuities compared
A general comparison. Actual terms depend on the bank, the insurer and the specific product.
| Feature | Bank CD | Fixed or fixed indexed annuity |
|---|---|---|
| Principal protection | FDIC insured up to applicable limits, generally $250,000 per depositor, per bank | Backed by the claims-paying ability of the issuing insurance company. Not FDIC insured |
| Interest | Fixed rate set at purchase | Fixed rate (MYGA) or interest linked to a market index, limited by caps or participation rates, with a floor that is typically 0% |
| Tax treatment | Interest taxed as ordinary income each year | Tax-deferred until withdrawn, then taxed as ordinary income. A 10% IRS penalty may apply before age 59 1/2 |
| Access to money | Early withdrawal penalty during the term | Surrender charges during the surrender period, which often runs several years. Many contracts allow limited penalty-free withdrawals each year |
| Typical time frame | Months to a few years | Several years or longer |
| Income options | Interest payments or lump sum at maturity | Can be converted to income, and optional lifetime income riders are available on some products, usually for an annual fee |
| At death | Passes by payable-on-death designation, or through your estate | Generally passes to a named beneficiary outside probate |
Straight answers
What these products do, and what they do not
What they can do
- Protect principal from market declines, backed by the issuing insurer
- Grow tax-deferred until you withdraw
- Provide income for life, if you choose an income option or rider
- Pass to a named beneficiary, generally outside probate
What they do not do
- They are not FDIC insured and are not bank deposits
- They are not liquid. Surrender charges can apply for several years
- Indexed products do not deliver full market returns, because caps and participation rates limit the credit
- They are not free. Income riders usually carry an annual fee
- They are not right for money you may need soon
Our approach
A three-step process
Free discovery call
We start by listening: your current savings, your income needs and your concerns. No cost and no pressure.
Your comparison
We compare your current CDs and savings against the alternatives that fit, with the rates, costs and limits of each in writing.
Your decision
If you choose to move forward, we help you apply and review the contract with you. If staying put is the better answer, we will say so.
Free resource
Want to read first?
Request our Retirement Income Planning Guide, a plain-language look at creating income in retirement and at principal protection options.
Get the free guideWhat to expect on your free call
- A review of your current CD and savings rates
- A comparison of the conservative options available to you
- The costs, surrender periods and limits of each
- Plain-English answers to your questions, with no obligation
Or call or text (251) 206-7074