CD’s aka Certificate of Depreciation

I was visiting with one of my clients earlier this week because they had a Certificate of Deposit coming due at one of the local banks.  My discussion with them prompted me to send this letter to every one of my clients.

 

“While I was visiting with this client, they mentioned they liked to have their money in CD’s because of the safety, the protection of their principal, and the fact that they can get some money out when they need (liquidity).

 

But, they came in to see me for two reasons; they weren’t happy with the taxes they were paying, and they were looking for a more competitive return.

 

See, what many people don’t realize is that you pay ordinary income tax on the interest you earn from your CD each year EVEN IF YOU REINVEST THE INTEREST.  Not only will this dilute your earnings, but it could force you to pay taxes on your Social Security Income as well.

 

On top of that, when you factor in the current interest rates CD’s are offering (around 2.5-3.25%), combined with the taxes you pay and current inflation rates, you will see that you could actually be losing purchasing power.

 

If you have a Certificate of Deposit coming due and would like to discuss some other options that will still provide safety, protection of your principal and access to your money, but will also give you the opportunity for higher returns and will allow you to avoid paying taxes on your interest until you use it for income, potentially reducing or eliminating the taxes you are paying on your Social Security Income, please give me a call.  There are several options available that will help you accomplish your goals.

 

P.S. – The client I talked about will save enough money in taxes to take their two grandchildren on a weekend getaway to Disney World! “