Annuities

This is a question that comes up more and more. If you go out on the internet, you will see all kinds of advertisements for these products. If you just plug the title above into a Google search, you will get hundreds of entries to choose from. Many of the articles and items will provide you with a balanced discussion. However, you will find many of the top placed ads to be very negative. There is even one advertiser who uses the titles “Beware of Annuities” and “I Hate Annuities and You Should Too.” Today, their banner ad (on Marketwatch.com) said “I would die and go to hell before I would sell an annuity!” Why would anyone have that kind of emotion around any financial product is beyond me!

A Deferred Annuity is an annuity that, by design, delays the start date of annuity payments. You can usually have a payment stream of as little as 1 payment or as long as your lifetime. There will be an “annuity start date” which is the date by which you must initiate income. This can be age 95 or even 100 in some cases.

Whave looked at immediate annuities and variable annuities. Now let’s take a look at the other remaining category, deferred fixed annuities. These have all the same tax deferral benefits as the variable annuity, but fixed annuities have an additional guarantee, the guarantee of principal. Some people look at these like cd’s from a bank. After all, the principal is guaranteed. You haven’t exchanged your cash for something else, like shares (only banks and insurance companies have products that don’t require you to exchange dollars for something else).

In previous articles we have talked about the different kinds of annuities that you may have seen on TV, in the paper, or had a financial advisor recommend you use. This article will talk about the pros an cons of a fixed indexed annuity (FIA).