Date posted: November 30, 2010
Since women tend to live longer than men but also work fewer hours outside of the home in their lifetime, they are at a greater risk for running out of money in retirement. Annuities are an excellent insurance product that can help women receive a guaranteed monthly income stream throughout their retirement. Christi Roberts of Annuity News Journal points out that most people do not have a traditional pension to carry them through retirement in her article “Women Find Retirement Stability In Annuities.” Annuities offer women the option of having an investment that is similar to having a personal pension. Since insurance companies usually soak up the risk involved in annuities in return for some of the return earned, investors really have nothing to lose.
There are many kinds of annuities for women and men to choose from, including deferred, immediate, variable, and fixed. 401k annuities roll all or a portion of the 401k savings built up over a career and invest that money in an annuity to pay over your lifetime. Investors have the option to protect themselves against inflation, receive payments for a specified period of time, for their lifetime, or for their spouse’s lifetime. There are many different riders associated with annuities to make them suit your individual needs. The costs and benefits will differ based on the insurance company issuing the product. Whether women have a 401k savings to rollover or would like to use personal savings to protect their retirement, annuities can help protect them against outliving their money.
Date posted: November 29, 2010
In the Expert Click article “Fixed Annuities vs. CDs: Is One Better Than the Other?,” financial planner Greg Womack weighs the pros and cons of the different investments. Whether fixed annuities or bank certificates of deposit (CDs) are best depends on each individual situation. Investors can also look into equity linked CDs, which have some characteristics similar to both annuities and CDs. CDs and fixed annuities are both safe investments, however unlike the FDIC insurance banks provide CDs, fixed annuities are backed by the insurance companies who sell them. If you want to invest over the long term, annuities are more the investment for you because CDs tend to be useful for short term investments.
Consider the rate of return you will receive with your investment. While fixed annuities and CDs tend to offer similar interest rates for similar products, the longer you hold an investment you usually receive more interest. Since fixed annuities are meant for the long term, you most likely will get more guaranteed interest with this investment. The equity linked CD criteria is different from both fixed annuities and traditional CDs because your interest is based on a stock market index, more like a variable annuity. There are definitely tax benefits associated with fixed annuities, so if you have any concern over paying taxes the deferral and social security calculations offer great benefits with your annuity product over your CD. Annuities are meant to provide you payments over your lifetime, while CDs are beneficial when you want to take a lump sum out at maturity. Weigh the pros and cons of all investments with your future goals to see what investment is best for you.
Date posted: November 28, 2010
Increasing annuity sales and an improving stock market helped Hartford increase its share price to almost $25, up close to 5%. This information comes from Christi Roberts’ article in Annuity News Journal, “Hartford Shows Strong Earnings.” Hartford’s third quarter income was $666 million, a huge improvement over the net loss of $200 million that they saw last year at this time. While financial analysts predicted that Hartford would make 98 cents per share, they actually made $1.34 per share. Hartford’s core earnings, those ignoring investment losses or gains, were $1.43 per share.
The deferred acquisition costs tied to variable annuities earned $166 million in income, accounting for 34 cents per share. As the global equity market saw an increase, so did Hartford’s deferred acquisition costs relative to variable annuities. The fees charged for variable annuities pay for the cost of selling those annuity products and are called deferred acquisition costs. Any increase in the stock market, especially that above what analysts predicted, results in an increase of income for the company selling the annuities. The improvements within the stock market helped Hartford with both their deferred acquisition costs and their share price increase.
Date posted: November 27, 2010
According to Matthew Sturdevant of The Hartford Courant, “Indexed Annuities (are) a Perfect Investment During (the) Recession.” His interview with Dana Pederson of Phoenix Cos. explains why equity indexed annuities are so important for investors and so popular right now. An indexed annuity is almost like a hybid of a fixed annuity and a variable annuity. Since your investment is linked to an equity index, you have the potential to earn money if there is a gain in your index. But unlike variable annuities, there is no risk of losing money because insurance companies hedge the risk of your investment and while you may not make any money, you definitely won’t lose any.
With record sales of equity indexed annuities in 2009, 2010 has the potential of beating even those sales figures. Driving the sales are the fact that investors have had time to learn about these safer investments as well as the burning desire to actually invest in a safer product after the past two years of market turmoil. The guaranteed income riders attached to these annuities are also helping to increase their popularity. Most equity indexed annuities are purchased with a lump sum and must be held for at least ten years. While they are set up to deplete by paying you guaranteed income for either your lifetime or as long as the value remains, death benefits for a beneficiary are available if the investor passes away with a remaining account balance.
Date posted: November 24, 2010
Women around the age of 73 are most likely to purchase an immediate annuity, according to “Who’s Buying Immediate Annuities and How to Get Their Business” by Danielle Andrus of Advisor One. LIMRA recently issued a report detailing the typical immediate annuity consumer and the direction they believe the immediate annuity marketplace will take over the coming years. Women buy 60% of immediate annuities and are around age 73 when they make their purchases. Women and men may choose to convert their 401k annuity using the pre-tax money from their working life 401k savings. Those who use pre-tax money to buy immediate annuities usually do such at the same time they start receiving Social Security benefits and IRS required minimum distributions from other investments.
Typically, immediate annuity purchasers choose to receive lifetime payments that are guaranteed, but do not opt for increases based on inflation or other factors. The average purchase of an immediate annuity is $107,000. Many buyers opt for some type of liquidity option that will allow them to receive a cash value for their annuity if they wish or a combination cash withdrawal and continued payouts. LIMRA thinks that this annuity market will increase from $7.5 billion last year to $7.7 billion this year and up to $11 billion in 2013. Advisors should take note that most immediate annuity contracts have guaranteed income benefits and payouts and the best age to cater to investors would be before age 62 when they start purchasing these investments in larger numbers.