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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While the financial climate is likely to continue its up and down pattern in 2012, the safety of annuities will keep their popularity intact this year.  Eric Thomes of Life Health Pro gives five predictions for annuities in 2012 in his article, “Annuity Industry Crystal Ball: 5 Predictions for the Year Ahead.”  First of all, chances are good that interest rates will remain low this year.  Even with low fixed annuity rates, sales of annuities hit records last year.  The industry has done a fantastic job of showing people that making money in retirement isn’t the only thing to focus on; it’s also important to protect the money that you have already made.

Markets are likely to remain volatile and the news media is hyping this up to the maximum.  The best thing you can do is maintain a financial professional that you trust to sort out the headlines and make sound decisions.  A volatile market is not necessarily a bad thing for annuity investors.  The industry needs to focus on the safety of annuities so that its clients don’t panic in down markets or rush into rash transactions when markets are up.  November’s presidential election will keep retirement a big topic in the news.  From Social Security and pensions to tax changes, regardless of the election’s outcome, annuity holders will be safe.

Fixed equity indexed annuities will be more popular than ever in 2012.  The end of 2011 brought new companies into the fixed indexed annuity market, companies who had never previously sold this type of annuity.  A rough financial market has highlighted the benefits of market downside protection and potential for upside gain that are offered by fixed equity indexed annuities.  More sellers means innovation and better choice in the fixed indexed annuity market.  Finally, investors will continue their need for safety and security in retirement.  The guaranteed income that you cannot outlive is an annuity benefit unparalleled in the financial world.  It is up to insurers and advisors to educate their clients about annuity benefits.

Written by Rachel Summit

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More and more insurance companies are offering indexed annuities now, especially those who were traditionally only big sellers of variable annuities.  Sheryl Moore’s Insurance News Net article, “Interest in Indexed Annuities on the Rise,” says that you have to look at the market to understand why many companies have decided to sell fixed equity indexed annuity products in addition to their other annuities.

During market increases, many people transfer their money from fixed products to securities so that they can take advantage of the increasing market.  Variable annuities sell very well after the markets hit rock bottom because they can only go up from there.  Market increases provide investors with great gains in their investments.  In a declining market however, investors tend to leave stocks, bonds, and variable annuities for fixed products.  They are fearful of losing money, including both principal and potential gains, so they turn to fixed annuities and indexed annuities.

When fixed interest rates are increasing, there is usually a corresponding increase in sales of fixed annuities and CDs.  When fixed annuity rates were in the double digits, there was an influx of fixed annuity 1035 exchanges and CD rollovers.  During a declining period for fixed interest rates, some investors hold on to their fixed products while others switch to securities like a fixed equity indexed annuity for some potential of a gain.

Taking a combination of these market conditions into effect, indexed annuities stand to gain in a low market with low interest rates.  That is why they have become increasingly popular in the last few years.  Insurance companies who previously disliked the products have realized that they stand to benefit from introducing their own version to consumers.  The principal protection with possible market gains is looking very good to investors right now.

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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There are far too many myths out there regarding annuities, according to the Digital Journal’s “JD Mellberg Tackles Annuity Misconceptions.”  The best annuities are a perfect retirement vehicle for many people, so JD Mellberg Financial set out to get accurate information about the products to the public.  The first myth is that the stock market is the best place for your money, even with the risks associated with it.  However, there are few circumstances where the stock market is a better investment than an annuity when you are trying to generate retirement income.

Secondly, people have a misconception that annuities are too expensive for them.  When generating retirement income is your sole goal, annuities actually save you money compared to some other investment choices.  A third myth surrounding annuities is that they won’t provide you with the money you need in the event that you get very sick.  Some of the best immediate annuities have options available where your payments increase up to 400% once you reach a predetermined age.  Others give you the option of withdrawing a certain amount of your principal without any penalties.

This amazes me, but the fourth misconception regarding annuities is that only variable annuities exist.  Depending on the fixed annuity rates offered, fixed annuities can be just what retirees are looking for to complete their retirement package.  Variable annuities are great for some retirees, but others prefer the security of a fixed annuity.  Lastly, people have the misconception that annuities are not the best product for most retirees.  While they aren’t perfect for everyone, the market protection they provide along with possible gains and guaranteed income are perfect for many retirees.

Written by Rachel Summit

Follow Rachel Summit on Twitter http://twitter.com/#!/financemama