Annuities as Investments
Submitted by tom on
I have heard that annuities are not good investments. How do I know if an annuity is right for my situation?
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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.
Financial Crisis Leads to New Respect for Annuities Among Financial Advisors
Some of the nation's most prominent financial advisors are looking at annuities in a new light. Partial annuitization to ensure a base of stable income is discussed. Think twice if you are at or approaching retirement and you are not able to at least have a basic annuity-related discussion with your financial advisor . "At the end of the day, investors want to know they can withdraw X amount of dollars [a year] for life. That's why it makes a little more sense than it ever has before," he says...
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Variable Annuity Assets Decrease 13% to $1.1 Trillion While Sales Decrease 15% to $154 Billion
The financial crisis took a toll on the amount of total assets and total sales within the U.S. variable annuity industry. Both figures had significant declines relative to the same period in 2007. That said, combined net assets in variable annuities in the U.S. still exceed $1 trillion, and total sales of variable annuities in the U.S. in 2008 exceeded $150 billion. Table 2. Variable Annuity Premium Sales(1) Quarter Ended Year Ended (Dollars in Millions) 12/31/08 12/31/07 12/31/08 12/31/07...
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Falling Interest Rates Equate to Lower Annuity Payments and Pension Income for Thousands of UK Retirees
Interest rates in many countries are at historic lows as a result of monetary policy that is intended to address the financial crisis. This low rate environment will have a profound impact on the finances of many retirees since interest rates are a key ingredient in annuity payments . "Thousands of savers who are about to retire could lose hundreds of pounds each year because leading pension firms have cut their annuity rates over the last two weeks, with Norwich Union, Standard Life and...
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Florida Considers Legislation Intended to Protect Seniors from Inappropriate Annuity Sales
The state of Florida is considering legislation that would impose third degree felony charges and a maximum of five years in prison for insurance agents who provide misleading annuity representations ("twisting") and inappropriate policy surrenders or withdrawals (" churning "). "Under the bill, which would apply to sales in Florida to people over 65, the surrender periods — or the length of time an investor must keep an annuity — would be set at a maximum of five years. The surrender fee — or...
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