Annuity FYI Blog

In “Why consider an annuity?,” Scott Lunsford writes in the Chillicothe Gazette that there is no better time than now to purchase an annuity.  He says that while some annuities can be complicated, a fear of many people, a fixed annuity is straightforward and offers you a multitude of benefits for your retirement years.  Since you insure your house and car with an insurance company, it is a wise decision to insure some of your retirement savings with one as well.

Fixed annuity rates are currently 3.5% and are guaranteed not to go below 2%, something that can’t be matched by many other savings vehicles.  You also are typically allowed to withdraw up to 10% of your money each year without a penalty and with death benefits, you can avoid the hassle of probate court after death.

Fixed annuities are similar to bank CDs, with the exception that they are most often bought through an insurance company rather than a bank.  Annuities are different in that they are tax-deferred and offer more flexibility than bank CDs and other savings vehicles.  They also have guarantees that last over your lifetime and in some cases, your spouse’s lifetime as well.  The author believes that everyone should at least consider purchasing an annuity, especially because of the volatile stock market and very low interest rates that we are currently experiencing.

Written by Rachel Summit

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According to “Retiring in a positive tax climate is only half the battle,” written by Christopher Scalese for The Times-Tribune, fixed and fixed indexed annuities could be great retirement vehicles for Pennsylvania residents.  They are lucky to live in a state with favorable tax codes for retirees, but Pennsylvania residents still have to find a way to maximize their retirement income.  In Pennsylvania, they have a low sales tax, Social Security benefits are not taxed on the state level, and pensions are only partially taxed.

These tax benefits are a great start, but residents still need to make the most of their retirement savings and annuity products are a good way for many people to do that.  Interest rates are very low on bank CD’s right now and although annuity rates are lower than they have been in the past, fixed annuity rates are higher than those of CD’s because they are offered by insurance companies rather than banks.  Fixed annuities are a good way to earn interest tax-deferred and keep your money safe from volatile markets.

If you are looking for some market exposure, fixed indexed annuities give you that, but they still protect your principal from any losses.  People who choose annuities are typically looking for a safe way to grow their money and ensure that it lasts through retirement.  Annuities also offer tax savings that can add to the benefits already established for Pennsylvania residents.  Every safe investment has terms that you should look into and annuities are no different.  It’s best to speak with an expert and make sure the product is right for you.

Written by Rachel Summit

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August bank sales of variable and fixed annuities were at their highest levels since March, according to Banker & Tradesman’s “Fixed, Variable Annuity Sales Both Up At Banks.”  The monthly Kehrer-LIMRA bank annuity study found a 22% increase in the total annuity sales from July to August.  The $3.6 billion in sales were up 42% from the start of 2011 and up 24% since August of 2010.  In the past two years, this is just the second time that bank sales have been higher than $3.5 billion.  Annuity sales have been decreasing since April, but experts weren’t expecting an increase to come in August, which is traditionally a flat month for annuity sales.

Variable annuity sales increased 15% from July to August.  The bank variable annuity sales totaled $1.9 billion, which was 56% higher than back in January and 35% above the sales last August.  Variable annuity reviews show that they valued $2 billion in March of this year for the first time in three years.  Sales are just under that now and banks hope to be back at the $2 million mark soon.  With a 32% month to month increase in bank sales of fixed annuities, their sales value reached $1.7 billion.  The gap between five year fixed annuities and five year CDs is at its lowest level in a long time at -21 basis points, down from a peak of 43 basis points in February.

Written by Rachel Summit

According to Insurance News Net, sales of fixed and variable annuities increased in the bank channel during the month of June.  In the article, “Sales of Both Fixed and Variable Annuities Up at Banks,” it says that June was the first month for a sales increase since March.  The last time for a sales increase for both fixed and variable annuities during the month of June was in 2006.  It is pretty rare that both annuity products see a sales increase during the summertime.  Bank sales of fixed and variable annuities have increased 48% since the beginning of this year and are up 31% since June of 2010.

Variable annuities have been on a steady upward climb for the past year and a half.  Their sales reached $2.1 billion in June, a level which hasn’t been seen since November of 2007.  Variable annuity reviews through the bank channel have shown many happy  investors.  Sales of variable annuities are up 69% this year and have increased 52% from the sales level in June of last year.  Sales of fixed annuities were up 3% in June, which is more significant because of the large declines during April and May.  This year, fixed annuities sold through banks have increased 28%.  They are 12% higher than in June of 2010.  Even though the 5 year fixed annuity average yield is still low, investors are getting competitive fixed annuity products based on the rate for term and rate for comp.

American Equity Investment Life Holding Co. CEO Wendy Waugaman was interviewed in the Des Moines Register article “W.D.M. firm’s CEO talks of annuities, economic growth.”  American Equity has the second highest sales of fixed equity indexed annuities, just above Aviva USA and behind Allianz Life.  The company was started in 1995 and went from selling $150 million of annuities in 1997 to $2 billion in 2001.  Their revenue is now up to $28 billion, largely based on sales of fixed equity indexed annuities.  Investors look to annuities even more in volatile markets and for good reason.  If you had purchased a fixed annuity in 1998 from American Equity for $100,000; the 2010 value would have been over $160,000.  In comparison, the same investment in an S&P fund would have been worth just under $109,000.

These guaranteed interest rates make annuities very popular, especially as 401k annuities purchased with some of a retiree’s 401k plan.  Waugaman answered questions about everything from annuity basics to the inner workings of American Equity.  When asked how American Equity makes money from annuities, she says that it is similar to a bank loaning your money to other people while paying you interest.  She says that they are growing faster than other annuity companies because of their excellent customer service to both agents and investors.  After being asked about interest rates, she was honest and said that they are frighteningly low.  She is hopeful that they will gradually increase so that they can offer higher immediate annuity rates and America can come out of the financial crisis.  American Equity has hired 80 people over the last six months and they have been in every area of the business.  American Equity is poised to retain their high position in the fixed equity indexed annuities market.