Annuity FYI Blog

Honesty is the best policy when it comes to filling out the medical forms related to your annuity products.  According to “Annuities: Medical Conditions May Offer Income Boost,” Nikki Hart of the UK’s Pension Calculator says that health problems could get you better annuity rates.  Fixed annuity rates are based on a number of factors, and what you are paid out is based partly on your health.  The better your health, the longer you are expected to live.  Living a longer life equates to more payments and money paid out by an insurance company for your annuity.

Some research shows that half of those with an annuity could be receiving higher payments based on their medical health.  The article stresses the importance of shopping around for the best annuities to find the best fixed annuity rates, but also says that being honest about your medical history could be helpful as well.  People suffering from coronary artery disease could get as much as a 17% increase in their annuity payments, while those with high blood pressure could get a 6.5% increase.  Even smokers and those who are overweight may get a slight increase in their annuity rates.  While I would rather be healthy and live longer, if that is out of your control it could get you more money in retirement.

Written by Rachel Summit

Ten insurance companies had their ratings downgraded by Standard & Poor’s after the government debt rating was downgraded.  In the Insurance Networking News article “Insurers Not Sweating Market Turmoil,” Bill Kenealy says that there will be little impact on insurance companies due to the downgrade and market sell-off that followed.  The Insurance Information Institute says that the operations of U.S. insurance companies are not likely to change because of the downgrade.  Insurers have conservative investment strategies and excellent business plans that will protect them from the market downgrade.  They also don’t have a lot of exposure to the U.S. bond market, making the downturn in U.S. bonds less significant.

With hundreds of billions of dollars as a back up for any unanticipated claims, the strength of insurance companies should not be a concern to policyholders right now.  A large financial cushion and a mere 6% of their total market investments being exposed to U.S. Bonds makes insurers stable.  Life insurers who sell annuities belong in this grouping as well, however they do have to prepare for a rise in interest rates.  If rates rise too fast, some of the fixed annuity rates could make for a devaluing of fixed income assets.  Insurance companies prepare for these risks though and are not concerned at this time.  The Insurance Information Institute says that policyholders, anyone filing insurance claims, and new insurance and annuities customers won’t see any insurance affects from the government’s downgrade.

If you have any questions or interest in a secondary market annuity, you can get a FREE guide from Annuity FYI.  We have been talking about secondary market annuities for awhile now because they can have fixed compounded effective yields up to 7.75%.  The Secondary Market Income Annuities Buyer’s Guide will answer your questions and give you a plethora of information on the products.  The guide is free to all visitors of Annuity FYI’s website, so sign up here for our SMA Buyer’s Guide if you’d like one.

Secondary market annuities come about when someone who has won money to be distributed through an annuity decides to sell their future annuity and receive a lump sum payment in the present.  You can purchase that annuity at a discounted price and receive the future payouts when the guarantee period is up, sometimes immediately.  These fixed annuity rates tend to be much higher than the rates of other fixed annuities, variable annuities, bonds, or CDs.  Find more information on secondary market annuities in the SMA Buyer’s Guide.

Fixed annuities guarantee lifetime income payouts based on a number of factors.  In EHow’s article “About Fixed Annuity Rates,” John Hewitt discusses the investments which guarantee a certain rate of return.  Fixed annuity rates change periodically like all interest rates, and your rate is usually locked in when you purchase your fixed annuity.  Insurance companies invest fixed annuity funds in assets like bonds or treasury bills that have fixed returns.  Fixed annuities are safe and dependable investments because they guarantee your rate of return and pay you monthly income through retirement.

Your fixed annuity rates are based on your age, health status, gender, and the market interest rates.  One fixed annuity benefit that investors like is the tax deferral.  Taxes are deferred on your principal and interest earned until you start receiving your payments.  Of course the guaranteed returns are popular as well.  Other investments don’t have guaranteed payouts, especially when they are tied to a stock market.  Fixed equity indexed annuities are a hybrid annuity that offers benefits from both traditional fixed annuities and those tied to a stock market index.  Fixed annuities, like most investments, are not right for every investor.  But if you plan on keeping your money through the maturation period, find a rock solid insurer, and get expert advice on choosing a fixed annuity, this investment could help finance your retirement.

While most people rely on the total 401k balance on their statements to plan their retirement, it is more important to know how that money will last by getting an annuity equivalent number.  The Lifetime Income Disclosure Act that Congress is researching would require the annuity equivalent number to be listed on 401k statements, according to Tim Grant of the Pittsburgh Post-Gazette.  His article, “Bill would require annuity data on 401(k) statements,” says that this annuity information actually gives the clearest picture on where you stand in your retirement planning.  The annuity equivalent is the amount of guaranteed lifetime income that retirees would receive at age 65 if they purchased an annuity with their entire 401k balance.

A New Mexico Senator said in the article that half of Americans will not have enough monthly retirement income to allow them to maintain their standard of living, and many Americans are not even aware of that fact.  He argues that this bill will let Americans know if they are saving enough to retire and maintain their lifestyle.  While the fixed annuity rates at the time the annuity is purchased will determine the exact monthly payout for each individual, the annuity equivalent number will give a good picture of the approximate monthly income retirees would receive if they purchased a fixed annuity with their 401k balance.  While the bill is still in the early stages, there are many bipartisan supporters as well as support from community organizations.  If the bill does pass, the Department of Labor will be in charge of issuing regulations to 401k providers.