Annuity

An annuity comes in many forms, but a simple definition is that an annuity is a contract that converts a sum of money into a series of periodic payments for an agreed upon period of time. An annuity can be thought of as a financial vehicle that converts a pool of money into a stream of income. Annuities are most useful in addressing the financial planning needs of people in or approaching retirement. Annuities are unique in the financial world because they can provide protection against the risk or outliving one’s assets (longevity risk) by guaranteeing income payments in perpetuity or any other selected amount of time. Annuities can be viewed as a type of personal pension plan. Social Security is similar to an annuity in that money contributed over the course of one’s working years is converted into a series of periodic payments that provide income during retirement.

Noteworthy Reads - October 17, 2013

- Buffett and Berkshire adding equity exposure to defined benefit...

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Jackson Approaching Variable Annuity Capacity Limits

In yet another sign of variable annuity capacity constraints, Jackson National recently announced that they are approaching the upper range for 2012 sales of variable annuities with guaranteed living benefits . Jackson’s November 8 press release indicates the company has roughly $1 billion worth of remaining 2012 capacity. Jackson indicated that this remaining capacity will be used for new product sales and that they will no longer accept new 1035 exchange business or qualified transfers...
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Understanding the Value of Living Benefit Guarantees

Advisor Perspectives just published the first in a series of articles from Wade Pfau. These pieces are important and should be read by anyone considering guaranteed lifetime withdrawal benefits or any of the other optional...

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Annuity Duration

Duration is a measure of the time associated with cash flows or payments from a bond. Duration measures the amount of time (in years from the purchase date) required for a bond owner to receive interest and principal payments that are equal to the cost of the bond.

Long duration bonds have payments that are spread-out over a relatively long period of time (e...

The Case for Mutual Insurance Companies

The best interests of financial services consumers are much better aligned with a mutual insurance company than a stock insurance company.

Mutual insurance companies are owned by policyholders. Owners of an insurance contract issued by a mutual company are both customers and owners of the insurance company.

Stock-based insurance companies are owned by shareholders, so their focus is divided between customers and shareholders.

Mutual insurance companies are a form of cooperative where individuals voluntarily associate to form an organization that serves the mutual...

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