Episode 76: Annuities vs Bank Accounts: Which One Actually Protects Your Money?

You might be wondering what banks have to do with annuities. That’s the point.

When people say they don’t want an annuity because the insurance company will just use their money to make more money—what they’re really saying is, “I don’t want someone else profiting off my savings.”

But here’s the truth:
Banks do that every single day—and with fewer rules, less accountability, and less protection for you.

Annuities are backed by life insurance companies, and these companies play by a completely different set of rules:

Banks	Insurance Companies (Annuities)
Use fractional reserves	Must keep full reserves
Can loan out your deposits	Can’t touch your money without limits
Bailouts funded by taxpayers	Regulated to be self-sustaining
Track record of collapses	Strong solvency ratios required

At the end of the day, the question isn’t just “Who pays more?”
It’s who’s safer to trust with your money. You decide.

How Banks Really Make Money

Here’s a simple version of how banks work:

• • You deposit $100 into a CD.

• • The bank promises to pay you 9%—you get $9.

• • They loan that $100 out at 15%—they make $15.

These are examples of some of the rates in the 1980s.  That might sound like a 6% profit. But it’s not. It’s a 67% return on your money.

To help it click, think of it like this:

If you bought a hammer for $9 and sold it for $15, you wouldn’t call that a 6% margin—you’d call it a 67% profit.

And here’s the key part:
The bank isn’t using its own money. They’re using yours.

What Happened to Interest Rates (And Retirees Who Trusted CDs)

In the early 1990s, the Federal Reserve said interest rates were too high. So they dropped CD rates from around 9% down to 3%.

If you were retired and living on bank interest, that was a disaster.

Meanwhile, banks could still loan money at around 9%. So:

• • They gave you 3%

• • They earned 9%

• • That’s still a 6% spread

But now they’re making a 200% profit on your money.

Deposit Rate (CD)	Loan Rate	Spread	Profit Margin
9%	15%	6%	67%
3%	9%	6%	200%

That shift hurt everyday savers, but boosted bank profits.

How the 2008 Crisis Made Things Worse

Here’s the part that really makes you think.

Leading up to 2008, banks were earning massive profit spreads. But somehow, they still went broke.

Instead of fixing the system, the government handed out billions in bailouts, paid for by taxpayers.

And where did that money go?

Many bank executives took huge bonuses. Loans didn’t get easier to access. And the people who funded the bailout—you and me—got nothing in return.

The Math Behind the Bailouts

Let’s break it down.

• • The government gave banks money at 0.5%
    

• • Banks gave depositors 0.5%
    

• • Banks loaned it out at 4%
    

That’s a 700% profit margin—on money that didn’t even belong to them in the first place.

And you know what’s worse?

They did it with almost no risk. Why? Because they knew if it all blew up again, we’d foot the bill just like we did in 2008.

Fractional Reserve Banking: The Truth About Bank Safety

Banks don’t even have to keep your full deposit in the vault.

Traditionally, they had to keep 10%—so if you deposited $100,000, they only kept $10,000 on hand. The rest got loaned out.

That looks like this:

Deposit	Reserve Held	Amount Loaned
$100,000	$10,000	$90,000

Then someone else deposits that $90,000… and the cycle continues. That’s how banks multiply your money into layers of debt.

But in March 2020, the Federal Reserve dropped the required reserve to zero.

Today, banks are legally allowed to lend out your entire deposit—every last dollar.

That brings us to the big picture. If you’re comparing bank accounts and annuities, here’s what you’re really choosing between:

Feature	Banks	Annuity Issuers (Insurance Companies)
Required Reserves	As low as 0% (since 2020)	Required to cover all liabilities
Use of Your Money	Loaned out to others	Held in reserve to meet obligations
Backed By	FDIC (taxpayer-funded)	Legal reserve requirements, state guaranty funds
Risk to Depositor/Client	High in crisis, low coverage	Lower risk due to regulation
Main Profit Model	Interest rate spread on loans	Fixed spread or fees, fully disclosed
Who Gets the Bailout?	Banks	Not needed for insurance companies

It’s not about hype. It’s about structure and safety. That’s why I don’t store my wealth in banks anymore.

Why I Don’t Use Banks to Store My Wealth

After learning how the system really works, I changed how I handle my own money.

I now use high cash value life insurance policies for my personal liquidity. These are built for stability and transparency.

If you want to understand why, a great book is The Creature from Jekyll Island. It’s long, but once you read it, you won’t look at banks the same way again.

Want to Learn How to Use Annuities for Safer Retirement Income?

If you’re looking for a place to store your retirement money—and you want growth, safety, and predictability—it’s worth exploring annuities.

Unlike banks, insurance companies:

• • Keep full reserves

• • Are regulated for solvency

• • Can’t loan your money out

• • Don’t rely on taxpayer bailouts

If you’re new to annuities, the best next step is to watch my short video series:
20% More Spendable Income in Retirement
It’s simple, educational, and shows you how these strategies work.

And if you’re ready to see whether an annuity is right for you, you can always book a short call. I’ll walk you through your options and help you make a plan that fits your goals.

All the best,
Marty Becker

Podcast Episode 76: Annuities vs Bank Accounts: Which One Actually Protects Your Money?

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