Annuities Broaden You Investment Portfolio

One of the main problems in the investment world today is with the onset of financial crisis, people are being forced to re-evaluate their financial investments and the risks associated with the same.

In today’s world with record-low interest rates, it is highly unlikely that interest rates will go down further. More than likely, the direction of interest rates is up.

Today, rates of return on fixed-income investments such as CDs are at record lows and, unfortunately, I believe they will stay there for a while.

Bonds aren’t the way to go either, especally because when interest rates go up, the value of a bond will go down. In conclusion, when interest rates are low, it doesn’t make sense to lock in that interest rate for a long time.

Most people have had to learn to be flexible in this economy.  With life spans being extended due to better health information and care, retirement periods are expected to be correspondingly extended.  Women, who statistically live longer lives than men, have a much greater ”longevity risk” and will most likely outlive their assets.

Retiree’s are now considering back-to-basic concepts and safer and more secure means of making money. One such of investment is an annuity.  Annuities appeal to investors today because of their generally decent—returns and the payout guarantee at the end.

Annuities can broaden your investment portfolio and give you the additional level of financial protection that you need to revel in your golden years.  Annuities are gaining appeal, particularly for people who are currently retired or nearing retirement and need a guaranteed stream of income in the coming years. “It becomes more like a self-funded benefit plan.

Annuities are a solid way for retirees to obtain a sense of financial protection in their retired life.  Annuities will ensure retirees that they will be financially fit to keep a certain quality of living into their retirement, by using the monthly payout to compensate their normal costs of living expenses such as property taxes, utility bills, food and gas.

An annuity will help both boomers and women maintain an income after retirement. The middle class typically have enough assets or “surplus wealth” to purchase an annuity that will insure a steady income post-retirement without having to scrape the bottom of the savings barrel.  An annuity is the one lump sum investment that helps you get monthly returns at fixed time intervals, at pre-determined rates. 

Fixed annuities are a good way to make money doing, essentially, nothing—much like a savings account. You invest your money in fixed annuities, let it sit and gain interest. Annuities guarantee income for your retirement while protecting your principal and providing modest growth and is the best way to weather today’s unpredictable financial climate.

Since no one can predict where interest rates will go, purchasing annuities (laddering)  over a period of years allows an investor to minimize the risk of low returns. By laddering fixed annuities to build a money pot, is a beneficial, valuable method in today’s economic climate. 

One annuity that makes sense in today’s world is a index annuity, which is a good investment towards saving money. First of all, Indexed Annuities, have a minimum guaranteed interest rate, specified at the beginning of the annuity contract.

Secondly, An Index Annuity is a form of investment where the return is linked to a performance index, for example, the Dow Jones index or S&P 500, or companies listed by Standard & Poor or similar rating agency. Growth in the index rate means a higher return mirroring the stock market, but a drop in the index does not mean decreased returns, since there is a minimum guaranteed amount of return prescribed in the annuity contract, so the holder is protected against negative market drop.

Additionally, on January 1, 2010, the risk of having to use your assets to cover going to a nursing home should your health change for some reason, a provision in the Pension Protection Act of 2006 permits tax-free Long Term Care payouts from annuities with a tax-qualified long-term-care rider. Policies written after the start of the year will enjoy the tax-free payouts as will annuities with LTC riders already in force. The rule also allows for Section 1035 tax-free exchanges into these combination products from older annuities.

Baby boomers–typically manage their money after retirement and live on a limited fixed income, annuities now make the management of those funds easy and safe.