Annuity

Annuities are becoming an increasingly popular retirement savings vehicle for people in the U.S. Many folks are seeking alternative instruments that can guarantee them a stream of income for life.

With corporate pensions gradually disappearing from the financial marketplace, annuities have emerged as a viable substitute for these bygone streams of income.

Most annuity contracts today come with a variety of benefits and features that were unheard of a generation ago. Living and death benefit riders, guaranteed income riders, and disability and long-term care riders are now commonly available in many annuity products.

However, in order to take advantage of many of these benefits, the annuitant will have to give the insurance company permission to annuitize their contract.

Annuitization is a one-time, irreversible event that ends the accumulation phase of the annuity, where money was being put into the contract or a lump sum of money was left to grow on its own. Annuitization marks the start of the payout phase of the annuity.

Read More

From variable to fixed annuities, millions of people buy annuity contracts for many reasons. These purposes range from lifetime income to asset protection and tax-advantaged growth. As a contract, each annuity has a different time period that it takes to mature.

Depending on what you buy, your annuity may have a maturity period that goes only for a few years. If your annuity has more benefits or the benefits are guaranteed for a longer time, its maturity period can be as long as 15 years.

But what about when you are on the backend? What should you do with your annuity at maturity? Annuity owners have a variety of options when they reach that point.

Depending on your age, financial situation, and the goals that you have for your annuity money, you can do the following when the contract ends:

• Keep your money in the contract and withdraw it at strategic times (or a certain withdrawal schedule),
• Cash it out in a lump-sum balance,
• Renew your contract,
• Annuitize your contract into an irreversible income stream, or
• Transfer the money into a new annuity contract.

Let’s go into more details about what you can do when your annuity contract matures. Read More

There are many different types of annuities available in the financial marketplace today. Two of the more popular types of annuities are fixed annuities and indexed annuities. Indexed annuities are also known as fixed index annuities nowadays.

Both kinds of annuities can have their place in a retirement financial plan. But there are key differences between a fixed and an indexed annuity that people should understand in order to make an informed decision when choosing which type to use.

Before we delve into the differences between fixed and indexed annuities, it’s good to know the ways in which they are similar. Read More

The modern financial landscape for today’s retirees is quite different from that of prior generations. Corporate pensions are disappearing, and the Social Security program faces new pressures from record-breaking numbers of people retiring.

Annuities have steadily emerged as a solution to these retirement income challenges. But up until some years ago, many retirees eschewed the use of annuities. Why? Because in order to get a guaranteed lifetime stream of income, they had to annuitize their contracts.

In order to do this, they had to effectively forfeit control of their money for the rest of their lives. Thankfully, life insurance companies have innovated and come up with a new benefit that gives more flexibility: an annuity income rider benefit. Read More

For retirement savers wanting more growth potential than what CDs and other fixed-interest assets might offer, fixed index annuities can be an attractive option. Indexed annuities can earn more interest over time than what these other options might.

Even so, some people would rather know that they are earning a guaranteed rate of interest. They are more comfortable with a minimum interest rate for their money’s growth.

Multi-year guaranteed annuities, or MYGA annuities, can fill this role for those who want a guaranteed interest rate with full protection of principal.

Multi-guarantee annuities are backed by the same dollar-for-dollar reserve requirements that apply to fixed and indexed annuities.

That means that for every dollar of MYGA premium that is issued, the insurance company must keep at least one dollar in its cash reserves to cover the outstanding amount. Read More

So, you have decided that an annuity makes sense for your retirement. But what type of annuity might be right for you? This will depend on the answers to a variety of questions.

What is your risk tolerance? What timeline do you have for your money? What annuity guarantees are important to you? What you hope to accomplish with the annuity contract? All of these considerations and more are relevant to what annuity might be a good fit for you.

Here are some questions to consider as you think about what annuity might be right for your situation. Read More

Annuities can bring more stability and certainty to a retirement portfolio. But how do you know you are getting a good deal for your money?

The biggest advantage that annuities can give for your retirement is their guarantees. Or in other words, the contractual assurances that the contract-issuing insurance company promises to provide you.

For your retirement, you might already have a number of financial guarantees that will contribute to your retirement security.

You paid into the coffers of Social Security during your career. In exchange, Uncle Sam guarantees you will receive a monthly paycheck from the SSA once you begin your benefits.

If you buy Treasury securities, you are guaranteed a return of your initial principal once the bonds mature. The bonds also pay you guaranteed semiannual interest payments during the maturity period. You also have these same guarantees when you hold a CD from the bank. Read More

If you asked a hundred financial advisors about what they use to construct retirement strategies, you would surely get as many opinions as there are flavors of ice cream.

Many portfolio strategies today call for strategic mixes of equities and bonds. Lots of research is on the so-called 60/40 portfolio, made up of 60% equity assets and 40% bond assets.

The problem is that bonds are particularly vulnerable to interest rate risk, which is the danger of an asset losing value when interest rates rise. And with interest rates sitting at basically zero percent for the foreseeable future, the only direction they can go is up.

This isn’t to say that bonds don’t have a place in a retirement income strategy. But there is also the flip-side to consider.

Do you really have all options on the table if your advisor leaves annuities out of the conversation? Unlike bonds of any sort, annuities are unique in that life insurers include estimates of people’s expected mortality into their payouts. Read More

Unlike other types of vehicles, annuities are the only financial instrument capable of paying a guaranteed lifetime income. They are the only one on the planet. No individual investor can duplicate what insurance companies can offer you with paying you a guaranteed income stream.

Nor can any other asset class do what annuities do. They have contractual guarantees backing them.

Dollar-for-dollar capital reserve requirements, as well as mortality estimates built into every single payout by the insurance company, makes these income promises quite dependable. In this sense, annuities have a monopoly on lifetime income.

You can choose to receive guaranteed income for a certain timespan. Say you need guaranteed income for just 10 years. Then your guaranteed income can be structured to last for that long. Or you can receive guaranteed income for the rest of your life, regardless of how the markets perform. Read More

Many people buy annuities for protection. But what kinds of protection can they provide? The answer depends in large part on the kind of annuity you own.

At the very least, all annuities can protect you against the financial risk of running out of money in retirement. Annuities counter this hazard by paying you a guaranteed income. Your income can last for a certain timespan or for life. This protection is available with fixed-type and variable annuities alike.

However, fixed annuities also protect the contract owner against downfalls tied to market risk, long-term care costs, and financial risks that can derail your legacy wishes. Here’s a rundown of what an annuity can protect you against in your retirement-saving and post-retirement years. Read More