If you have certificates of deposit, you are paying tax on the interest annually.  So, your effective yield on the certificate is reduced by your tax bracket.  Let's go back to our national averages.  For a three year certificate, the average rate is 4% or an effective rate of 3% after taxes at 25%. The equivalents for other terms are: Four year rates are 4.1%, or 3.07% after tax.  The five year rate is 3.39 or 2.54% after tax.

At this time, the absolute rates on tax deferred annuities are higher than certificates of deposit.  You can obtain quality annuities yielding 4.3% for three years, 4.45% for four years, and 4.7% for five years.  the taxes on these will be deferred until you cash them out, but the advantage of the tax deferral is that your after tax return is higher.  Of course, you can increase your advantage by holding the annuity longer, but the important thing to understand is that you gain either way.

For those who are holding savings in bank certificates, this is a good time to investigate the advantages of tax deferral.  Contact us and we would be happy to provide spreadsheets of top rates for quality companies.