The first thing you need to consider is how often you will want to have access to the cash.  The less often you need the cash the higher the interest you earn will be.  For example you can earn four percent or so on a CD which is a certified deposit.  The bank will require you to leave the money alone for three months at least, if not you won’t qualify for the interest you earned.

If you don’t need the money for a few years or say you have a small seed amount you want invest now to pay for a family vacation when your kid turns 16, or what is more likely you will have an investment goal for when that kid turns 18 – college.  So you start with a few thousand and invest it in a mutual fund rather than a savings account, this way the risk is hedged but still around ten percent, which is two to three times as much as what you would get in a regular savings account.

Then there are the rest of us who just want the best way to invest our cash but still have access to it.  Here is the plan, enroll in an online savings account from ING or any other internet bank and have your paychecks deposited into it, then just withdraw any of the money you need into your regular checking account, its super easy.  What this allows you to do is benefit from a four percent or higher interest rate on all your savings, and still withdraw what you need.  Internet banks are the best place to get a high interest savings account because they don’t have the same overhead costs as your local bank.  If you are looking for other investment options consider purchase structured settlement as a way to go.

You are better off making the switch from an annuity to the mutual fund.  An annuity is nothing more diverse than a savings account with an insurance company, although you can get a variable annuity there is no point in doing that for a retirement account.  The reason is because a variable annuity is nothing more than a regular mutual fund insured by an annuity and you are required to pay extra for the safety net.

In the end when it comes to your retirement you should always just opt for the good growth fund for your retirement.  The only advantageous time to use a variable annuity is when you have maxed out all other retirement savings and the mortgage you have is totally paid off.

The reason for that is quite simple annuities are a fund you purchase and then have the annuity pay you back monthly.  It is more a way to secure consistent income than to grow your money.  The interest paid out is barely enough to keep with inflation.  Annuities are better served to supplement a settlement than as an investment option.  That is of course unless you are buying the annuity from someone who had already had the annuity awarded them because you can purchase the annuity at a huge discount.

What typically ends up happening is the annuity is supplied as a way to repay a judgment.  The one who is awarded the annuity goes for a few years and then decides it is time to cash out their annuity and take a lump sum currently rather than continue to receive the payments over time.  If you are investor you can convince these people to take significantly less than what the annuity will eventually pay out.  Essentially you are taking advantage of someone who cannot maintain a proper financial record and want money now, usually because they are in debt as a result of consumer spending.

Annuities are not the way to have your money grow for you; but they can be a great way to supplement income if purchased under the proper circumstances.