Annuity FYI Visitor Blog

In “Consumers’ Interest in Guaranteed Living Benefits Remains Strong in 2009, LIMRA Reports” from Insurance News Net, LIMRA’s 4th quarter findings are detailed.  When variable annuities offer the Guaranteed Living Benefit (GLB) rider, 84% of people elected to get the rider in the 4th quarter of 2009.  The four quarters prior to last, 89% of people elected for the GLBs.  The small decline is associated with a similar decline in the guaranteed living withdrawal benefit rider (GLWB), although the market share for GLWBs was still high.

LIMRA believes that the high number of investors opting for the security of the GLB is directly related to the shaky economy.  Even though insurance companies are trying to decrease the attractiveness of these low-risk riders, 80% of variable annuity contracts last year elected a GLB.  From the beginning of 2009 to the end, sales of variable annuities with GLBs attached increased by 41%, while total variable annuity assets increased by 21%.  New investors’ high rate of election of the GLB rider accounts for the larger increase of products with GLBs.  Many older annuities do not have the rider and are past the point of having a surrender charge so may leave the market.

In the PR Web press release “Annuity FYI Endorses FDIC Insured Equity Linked CDs as Preferable to Fixed-Indexed Annuities,” Annuity FYI’s endorsement of equity linked CDs is highlighted.  Equity linked CDs seem to be a better investment for most investors than fixed-indexed annuities.  The investment products are issued by banks and linked to particular stock market indexes.  The FDIC insurance associated with equity linked CDs ensures that your principal is guaranteed.  Even though they are not annuities, Annuity FYI believes that the similar benefits offered by both investment products makes them both an important part of investors’ portfolios.

Wells Fargo’s WISE US Index Equity Linked CD is Annuity FYI’s top pick for investors.  With a 6 year time frame, FDIC insurance, and market upside participation, Wells Fargo’s product is one of the best available.  There are other benefits to this particular product as well, including a high participation rate.  Annuity FYI likes equity linked CDs over fixed-indexed annuities because the latter tend to have high fees that are not in proportion to the benefits investors receive.  Some of the best benefits to equity linked CDs are their low cost, principal protection, and benefiting from market upswings.

Many investors worry about inflation when they purchase an annuity.  In exchange for a lump sum payment, annuities offer you a lifetime of guaranteed income with a fixed monthly payment.  In the AnnuityRates.org article “Should I choose an Inflation-Proof Annuity?”, the topic of purchasing an annuity that adjusts with inflation is discussed.  Buying an inflation-proof annuity links your annuity to the RPI (retail price index) so that annual rises in inflation will be matched by annual rises in your annuity payments.  An inflation-proof annuity is not the only way to protect yourself from inflation with annuity products.  You can have built-in increases with standard annuities, they just don’t have the guarantee to match the inflation percentage.

Some of the main advantages and disadvantages to inflation-proof annuities follow.  You will receive guaranteed income over your lifetime and your purchasing power will be protected against the rising prices of inflation.  You will be protected in the case of a drastic increase in inflation and the cost of basic goods and services.  On the downside, your initial income would be lower than that of a traditional variable or fixed annuity.  Your rates will also be based on a forecast of what the future inflation will be since no one knows for sure.  If the inflation rate actually went down to 0%, your income would unfortunately decrease.  There are riders to protect against deflation or no inflation, but those would also decrease your starting income.  Take these variables and use them to determine the best annuity for you and your family to be protected in the future.

Since Annuity FYI has added equity linked CD investments to our recommendations, it is important to explain how the recommendations come about.  Equity linked CDs have a lot of the same benefits as annuities so they can be easily compared.  Those benefits include principal protection, market upside participation, and a low cost.  Annuity FYI believes that an equity linked CD can be an important part of retirement portfolios.  They are preferred over fixed/equity-indexed annuities because of their low cost, short time commitment, and the fact that they are FDIC insured.

The equity linked CD criteria used to evaluate the products and companies selling them is straightforward.  A participation rate with the corresponding index, for example the S&P 500, higher than 90% is preferred.  A low spread of 1% or less also indicates a preferred equity linked CD.  Annuity FYI looks for equity linked CDs without a performance cap rate and with a maturation period of six years or less.  When evaluating the insurance company selling the equity linked CD, their customer service skills, company management, and the ease in which you can access your account are all taken into consideration.  Contact an expert for more information regarding equity linked CDs.

With $30 billion of sales in 2009, indexed annuities set a record for the highest sales of all time, according to “2009 Indexed Annuity Sales Set Record” from Insurance News Net.  The previous record from 2007 was beat by close to 10%.  Data representing 99% of the companies selling indexed annuities was collected by Annuity Spec’s Indexed Sales and Market Report.  While 4th quarter indexed annuity sales were down from the third quarter, sales levels were adjusting back to a normal level after their record highs.

Allianz Life remained in the top spot for total 2009 sales, as well as staying in the #1 carrier position in the market.  Their MasterDex X held its position as the top selling indexed annuity for the third quarter in a row.  Indexed annuities are tied to the markets, proving that their annuity rates were popular to investors.  After Allianz Life, Aviva moved up to the second spot in this annuities market.  The third, fourth, and fifth spots were occupied by American Equity, Jackson National, and ING.  In regards to bank and wirehouse 4th quarter distributions, Jackson National Life had the most indexed annuity sales.