Restored Interest in Variable Annuities

According to California’s Daily Breeze article “MONEYWISE: Looking into the renewed interest in investing in annuities,” Stephanie Enright says that the government’s interest in promoting annuities has sparked an increased interest from investors.  Annuities are most often issued by insurance companies and grow over time with the expectation that you can receive lifetime income payments in retirement.  Two reasons annuities are popular are that some have a long-term-care insurance rider, which is increasingly popular today.  They also grow tax-deferred until you receive your money, then they are taxed like ordinary income.

Fixed annuities and variable annuities are your two options.  The fixed variety gives you a certain return based on interest rates at the time of purchase or a link to a financial index.  Variable annuities can have greater risk, but greater reward as your return is variable.

The author believes that the two most important things to consider when looking into annuities are the financial strength of the insurance company issuing the product and the structure of your contract.  Comdex ranks insurers based on the financial strength ratings from companies like Moodys, Standard & Poor’s, and A.M. Best Co.  Their stability and financial strength is the only thing guaranteeing your lifetime income payments.  You also want to know how your annuity agent is paid through commissions and fees.  Other contract details include riders like death benefits for spouses or other relatives.  Make sure you know all of the annuity details before purchasing the product.

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