đź’° Annuities vs. CDs in Hog Country: Is Your ‘Safe Money’ Keeping Up with Fayetteville’s Growing Cost of Living?
If you’re like a lot of folks I talk to in Fayetteville and across the Northwest Arkansas region, you’ve got a chunk of money that you call your “safe money.” It’s the savings you absolutely can’t afford to lose. Maybe it’s in a Certificate of Deposit (CD) at a local bank, or maybe you’ve looked at a fixed annuity. The point is, you want it secure. You want peace of mind.
And I get it. Nobody wants to put their nest egg at risk. But here’s the cold, hard truth that nobody seems to be yelling from the rooftops: your “safe money” is actually losing ground every single day. The hidden, silent thief called inflation—which runs around 3% nationally right now, but feels higher when you look at the price of housing in Bentonville—is chewing up those small gains you’re getting.
The CD Catch: Safe, But Not Secure
A CD is probably the most common way folks in our area try to keep money safe. It’s insured by the FDIC, so the principal is protected.
The problem isn’t the safety. The problem is the return. If you’re getting a 2% or 3% return on your CD, but the real-world inflation rate is 3% or more, your purchasing power is going backward. A CD is fantastic for money you need in the next 12 months, but for long-term savings, it’s failing the inflation test.
The Annuity Maze: Not All Guarantees Are Equal
A fixed annuity is another vehicle people use for “safe money.” It’s basically a contract where an insurance company guarantees a fixed interest rate for a set period. This can look appealing—often slightly better than a CD—and it provides tax-deferred growth.
But here is the catch: a fixed annuity with a low-to-moderate rate is subject to the same inflation problem as a CD. If the guaranteed rate is 3.5%, but local costs in Rogers and Springdale are going up 4.5%, your money is still buying less next year. You need to look carefully at the real return after inflation.
The Real Battle: Interest Rate vs. NWA Inflation
Let’s do some simple math. If you put $10,000 into a vehicle earning 3% and the inflation rate runs at 4%, your money grew to $10,300 in one year. But the goods and services you planned to buy with that $10,000 now cost $10,400. You are down $100 in buying power.
True financial safety isn’t just about protecting the dollar amount; it’s about protecting what that dollar can buy.
What to Do Now: Taking Action
We work hard for our money in Northwest Arkansas, and we should expect it to work hard for us. Here’s how to start fixing this:
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Segment Your Money: Keep truly short-term cash (the emergency fund) in liquid accounts.
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Evaluate Your Goals: For long-term savings, you need vehicles that are designed to keep pace with, or beat, inflation. Look beyond traditional CDs.
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Consider Fixed-Rate Alternatives: There are investment-grade fixed-rate vehicles, like multi-year guaranteed annuities (MYGAs), that can offer better rates than average CDs while still protecting principal. You need to explore options that give you the safety you want with the performance you need.
Click here to schedule a 15-minute conversation with me, Jerry, to run the numbers on your current strategy and discuss higher-performing fixed-rate options available right here in Northwest Arkansas. Let’s make sure your safe money is actually working as hard as you are.
Let’s talk about your next step
If you’re researching fixed annuities or life insurance in Northwest Arkansas, I can help you compare options side by side and design a plan that fits your goals and budget. Want a quick, no-pressure consult or a fast quote? Reach out and I’ll walk you through it in plain English.
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