Annuity FYI Visitor Blog

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.

While American Olympic medalists are admired and popular after their wins, in some other countries an Olympic gold medal could bring immediate annuities.  According to “Continued success expected for gold-medal winner Kim Yu-Na” in The Hankyoreh, South Korea’s Kim Yu-Na will increase her wealth with her gold medal win in women’s figure skating.  Her final score of 228.56 was not only the highest ever recorded in the event, it also beat her Japanese rival Asada Mao by over 20 points.  Kim’s win gave South Korea their first ever gold medal in the sport and is expected to make her money from endorsements and the annuities her country will provide.

The gold medalist will receive a payment of approximately $52,000 for winning the competition.  The annuity score she had of 24 will now increase to 114, making her monthly annuity payment go up to $862.  Her previous annuity payment was based on a win at the World Figure Skating Championships and a couple of third place finishes.  Some countries offer these immediate annuities to their top athletes as motivation to keep them working hard for the country and to keep them in the press.  Kim Yu-Na is expected to receive a lot of endorsement deals from her gold medal win as well.  The question remains whether she will train for the Sochi, Russia Olympics in 2014 or turn professional and tour with other “retired” figure skating greats.

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.

In “Sidestepping Skepticism, Prudential Scores with Variable Annuities,” Matt Ackerman of Bank Investment Consultant describes how consumers’ opinions of variable annuities are changing.  While many people thought variable annuities were “too expensive or too complicated”, they seem to realize the great potential of these annuity products now.  Since retirement savings have gone down by 40% over the last year and a half, consumers are warming up to this product with its guaranteed income, protection against the market downside, and the ability to reap the benefits of an upswing in the markets.

Prudential Financial’s U.S. annuity business is very strong.  They saw a 53.8% increase in annuity sales last year, with fourth quarter annuity sales increasing 71.4% from the year before.  Their growth in the bank channel has been very substantial as well.  After adding fifteen new banks to their distribution channel last year, their bank sales of variable annuities increased by 152%.  Bank clients typically like to purchase fixed annuities, CDs, and other products that they deem “safer.”  Since the returns in those products haven’t been quite as successful for their retirement income savings, variable annuities are garnering more interest.  Prudential is sticking with this product that they believe in by introducing new products and options, and always being an innovator.