Annuity FYI Blog

According to a press release on Yahoo! Finance, “Bank of the West Introduces Market Linked CDs (MLCDs).”  When you compare equity linked CDs with other investments, the main benefit is that you have the protection of FDIC insurance along with participation in the markets.  Bank of the West’s Market Linked CD is tied to a basket of stocks and offers interest rates that are linked to either fixed income, commodity, equity, or foreign exchange markets.  The company is excited to be able to offer its customers the potential for appreciation that the stock market affords.

As long as investors keep their equity linked CDs until the maturity date, FDIC Insurance covers the entire principal invested so you are protected from a volatile market.  Maturity dates range depending on the individual investment contract and minimum investments begin at $1,000.  Equity linked CDs are the easiest way to protect your investment while still having the potential for stock market returns.  Individual investors, corporations, and institutional investors will all have the opportunity to purchase this product from Bank of the West.  Compare the benefits with other equity linked CDs like the Wise Indexed CD before making any purchases.

Prudential Financial Inc. and American International Group Inc. contributed to the United States’ largest variable annuity sales increase since 2007.  According to Bloomberg’s “Variable-Annuity Sales Rise 11% as Prudential, AIG Post Gains” by Inyoung Hwang, the $35.5 billion in sales was an increase of 11% for the second quarter of this year.  Prudential sold $5.3 billion of variable annuities to capture the top spot in sales.  This was a huge increase from their $3.38 billion in sales during the second quarter of last year.  Limra International believes that the market is showing signs of recovery since most of the top 20 companies had growth in their variable annuity sales.

After AIG was helped by the federal government, they increased their variable annuity sales 45% from $1.09 billion to $1.58 billion.  AIG was able to increase their operating profit by 17% after the profit from their U.S life insurance businesses quadrupled from last year’s profits.  The second highest sales of $4.5 billion belongs to MetLife Inc., although they experienced a very small decline from the same period last year.  Annuity rates and other factors contributing to the variable annuity sales affected the top companies differently.  The third and fourth place sellers were TIAA-CREF and Jackson National Life.  The industry is hopeful that this second quarter increase will continue into the future.

In the past, many wealthy investors shied away from annuities, traditionally a middle class investment used to pay basic living expenses in retirement.  More and more of the wealthy population realizes the guaranteed lifetime income and tax benefits they will receive from purchasing annuities, according to “An Annuity: What No Well-Heeled Client Can Do Without.”  Warren Hersch’s article, from the National Underwriter, discusses the benefits that clients with a high net worth will receive from a fixed, variable, or indexed annuity.  A study by Cogent Research showed that 34% of affluent investors have purchased an annuity, an increase of 4% in the past 4 years.  The recession that started in 2007 is one of the biggest reasons for the change.  People from all income classes have switched to low-risk investments to hedge their losses.

As the wealthy prepare to get hit harder by President Obama’s impending tax hikes, they are finding more value in investments like annuities that defer income taxes.  You won’t pay taxes on your annuities until you start receiving the income and it’s quite possible that you’ll be in a lower tax bracket by then if you’ve retired.  Wealthier investors are less worried about the riders associated with a variable annuity or purchasing a death benefit annuity.  Those mainly looking for growth that is protected from taxes want the basic annuities without paying for added bells and whistles.  The article suggests that you look for an annuity that pays out on a pro rata basis, which takes both principal and taxable gains with each payment rather than beginning your payments with only the taxable gains.  As with any annuity investor, research your product fully before making your investment.

New York Life Insurance Company had a great first half of 2010 thanks to their sales of long term care insurance, fixed annuities, and mutual funds.  According to Insurance News Net’s “New York Life Sees 47% Rise in Life Insurance Sales in First Half of 2010,” the largest mutual life insurer in the U.S. and its 11,500 agents will remain leaders in their marketplace.

The 47% increase in sales of individual life insurance is even in comparison to 2009′s all-time record sales.  Their Custom Whole Life insurance allows consumers to choose how long they pay their premiums.  Sales increases of permanent insurance and term products helped the growth this year.  Americans choose New York Life for their stability, guarantees, and exceptional agents.  Clients are choosing whole life policies because of the death benefits they offer as well as the cash value benefits you get while living.  New York Life has the largest portion of new life insurance premiums in the U.S.

With a record $870 million in new lifetime income annuity sales for the six-month period, New York Life is grateful to its sales agents and third party distribution channels.  Their fixed immediate annuity products have much value to offer both pre-retirees and retirees.  New York Life has recently had their financial security ratings affirmed by all four agencies so they are an obvious choice for the guaranteed lifetime income offered by fixed immediate annuities.  Long term care insurance purchases are also increasing because of the surge in health care issues associated with living a longer life.  New York Life’s mutual funds are seeing sales increases as well because of their widespread field of agents and distribution channels across the U.S.

Unfortunately government Social Security doesn’t look like it is going to give retirees the retirement they expected in the future, so wise investors are looking for ways to supplement or replace that lost income.  “Save Your Retirement From Certain Doom” by Dan Caplinger of The Motley Fool talks about a few options for replacing that income.  A recent Social Security Administration update showed that while Medicare should remain solvent longer than originally expected, Social Security looks to pay out more in benefits this year than it will receive for the first time in over two decades.  The author recommends the use of annuities to help generate income in retirement that will cover Social Security shortfalls.

Immediate annuities provide income streams over your lifetime.  After buying the investment from an insurance company, your fixed payment becomes a monthly stream of income payments that vary based on life expectancies.  Annuities may be the only dependable way to guarantee your monthly income with the uncertainty linked to Social Security and private pension plans.  The author also believes that retirees should take more risk in order to profit from higher returns.  He suggests dividend stocks like Annaly Capital, growth stocks like Netflix, and higher-yielding bonds.  While he acknowledges that any new plan should be used carefully, these options seem to make for a greater chance of future financial security than relying on Social Security.