The TDA I compared with CD has to be purchased making a single payment of after-tax dollars as for a conventional CD, is free from any up-front or maintenace charges, is not subject to 'mortality and expense charges', and has similar surrender charges as a CD (depending on the company issuing the TDA). On maturity, one can cash the entire proceeds and pay income tax on the total income in one go, or can take it in the form of an immediate annuity (fixed or variable), in which case the tax payment is spread out over the duration of the annuity as per IRS rules (IRS 939). The question of security did bother me, as there is no FDIC guarantee for a TDA, and as even an S&P AA+ company can go belly-up in 5 yrs time, given the uncertainties of the present financial markets. But, if I understand it correctly, the department of insurance for each state covers up to 100K of investment in annuity. I have yet to check it up.
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