Annuities The Safe Money Product

Whatever your current financial situation, you must continue to strive for a viable retirement plan by finding the most effective ways to save, the best accounts to save in, and the right amount to save, as well as understanding how to insure against setbacks and handle the uncertainties of a shaky economy. 

Right now, about one-third of retirees receive income from a pension — a traditional defined- benefit plan — and annuities.  That’s all well and good, but we also know that the 77 million baby boomers who have yet to retire likely won’t have a traditional pension.

If you don’t have a pension, you don’t want to rely on Social Security and you don’t think you’ll work in retirement, that leaves your assets as your main source of retirement income.  But in the main, you’ll have to save enough and invest well enough to create a nest egg that will replace all the income that might have come from pensions, Social Security and work.

Investing in high risk ventures may be a poor idea as you may wind up losing what you have worked to save. It is important to allocate your assets in a wise, financially responsible.  Don’t rely on things that may not be a concrete source of income.

How would you like to own an annuity that locks in stock market gains when the market is rising, but also protects your investment against any losses when the market is falling? That’s right, your policy value is never reduced because of negative stock market performance.

Equity Index Annuity, Index Annuity, and Fixed Index Annuity are all generic names for this type of NO RISK Fixed Annuity.

Index Annuities allow you to Earn Interest Annually Based on a portion of the Upside movement in an Equity Stock Market Index such as the S&P 500, which is the most often used (other indexes are available even within the same annuity) with NO DOWNSIDE RISK and COMPLETE SAFETY.

The Key to Why Index Annuities Perform so Well is Simple: THEY NEVER SHOW A LOSS. 

An Equity Indexed Annuity (EIA) is a great financial tool. You get at least a minimum return, but a chance of greater returns according to participation in an index. For people who are afraid of losing money in the stock market, an EIA offers CD-ish safety but with the hopes of greater returns.

Your equity-indexed annuity, like other fixed annuities, also promises to pay a minimum interest rate. The rate that will be applied will not be less than this minimum guaranteed rate even if the index-linked interest rate is lower. The value of your annuity also will not drop below a guaranteed minimum.

For example, many single premium annuity contracts guarantee the minimum value will never be less than 90 percent (100 percent in some contracts) of the premium paid, plus at least 3% in annual interest (less any partial withdrawals). The insurance company will adjust the value of the annuity at the end of each term to reflect any index increases.

Investment products include stocks, mutual funds, and bonds.  Investments are regulated by the Securities and Exchange Commission (SEC).  Annuities are regulated by the 50 state insurance commissioners of the United States. 

Annuities are “Safe Money Products” which preserve principal.  Investments, by contrast, can put all of  your money at risk and are therefore appropriately classified as “Risk Money Products”. Where you are subjected to the highs and lows of the market.  Investments do not preserve principal where annuity do.  

The annuity vendor company puts your indexed annuity payment in their general account, not in a separate pass-through subaccount.  In  a  general account, your purchase payment is never at risk due to market fluctuations as monies allocated to a separate pass-through subaccount would be.

Indexed annuities is a good way to invest your money in the stock market if you are looking to maximize gains while keeping risk to a minimum.  The product was developed recognizing that each consumer has a different risk tolerance and many are unwilling to accept the potential losses of the market in order to maximize their gains. 

Investing directly in the stock market in no way keeps risk to a minimum and by playing the market is like playing the lottery.  You may win big, but you are more likely to lose big with this strategy.

Annuities are in no way like playing the market.  Just look at the guarantees.

• An annuity is the only financial instrument that can guarantee an individual an income that they can never outlive.
• No indexed annuity purchaser has lost a single dollar as a result of the market declines. 
• All indexed annuities return investments paid plus interest at the end of the annuity.
• All annuities defer taxes.  You are not taxed until you start withdrawing income.
• Annuities allow you to accumulate additional interest above the premium you pay in.  Plus, you accumulate interest on your interest, and interest on the money you would have paid in taxes.  (Triple Compounding)
• All Annuities provide a death benefit to heirs as the full account value is paid to your beneficiaries upon death.
• All annuities provide access to your money if you need it.  Annuities allow annual penalty-free withdrawal of the account value, typically at 10% of the annuity value, and most annuities permit access to the annuities value without penalty, in the event of triggers such as nursing home confinement, terminal illness, disability, and even unemployment.
• Many annuities provide a up-front instant bonus on your annuity’s value.  This can increase the annuity’s value in addition to helping with the accumulation on the contract.

Some years the indexed annuity may return a double-digit gain and other years it may return only the minimum guarantee interest.  However, what is most likely to happen is something in between. 

Indexed annuities interest is limited through the use of cap, participation rate or spread.  Were the indexed interest not limited, the annuity company could not offer a minimum guarantee on the annuity. 

On the other hand, you are guaranteed to never receive less than 3 percent interest and will receive a return of no less than 117% at the worst case scenario on the average indexed annuity end.  ( a proposition that millions of Americans are wishing they had during this last economic downturn)

An Equity-Indexed Annuity is a great place to protect the money you’ve saved in your CDs, money market accounts, IRA accounts, etc. Or perhaps as an alternative for the money you currently have invested in stocks and mutual funds. Equity-Indexed Annuities can greatly improve your earnings potential, while at the same time keep your principal safe from market fluctuation.

Additionally, Equity-Indexed Annuities are a good option for people who already own annuities and have seen their interest rates drop substantially. Many people do not realize that you can easily trade-in an older, possibly under-performing annuity for one that better suits your needs. This exchange can be accomplished with no out-of-pocket expense or current taxes to pay!