Interest Rates

Interest rates represent the cost of capital or what you pay to borrow money. A detailed definition of interest rates is beyond the scope of this glossary. What is important to remember is that interest rates are critical components of virtually every financial product you consume. This is especially true with annuities because, in general, insurance companies manufacture annuity products through a combination of bonds and derivatives. As a result, interest rates are the raw material of all annuity types.

Comparison Shopping for Annuities

A good question and answer piece from the Chicago Tribune. The reader had just purchased a $400,000 immediate annuity at a relatively young age. The purchase was also made from one insurer in a relatively low interest rate environment. Having both a pension and Social Security (both are lifetime annuities), I would not have committed half my portfolio to an income annuity at the relatively young age of 63 and during a period of low interest rates. It does not appear that the annuity came with...

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A Changing Variable Annuity Landscape -- What to Watch for in the Next Few Years

This is the second part of an interview with...

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A Changing Variable Annuity Landscape -- The Consumer Perspective

This is the first part of an interview with Ryan Hinchey.

Ryan is a consulting...

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Guaranteed Living Benefit

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Consider Annuity Ladders to Meet Retirement Objectives

An annuity ladder basically involves spreading annuity purchases over time. For example, instead of taking $100,000 to purchase an immediate annuity today, a person might purchase five different $20,000 annuities over a seven year period. This approach has a number of advantages: The approach helps avoid the risk of purchasing an annuity at a less then optimal time--for example when interest rates are very low. In this sense, it is somewhat similar to dollar cost averaging when investing . The...

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Sequence of Returns Risk

Credit Risk

Interest Rates

Annuity Ladder

Dollar Cost Averaging

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Sequence of Returns Risk

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Interest Rates

Annuity Ladder

Dollar Cost Averaging

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Bond Vigilantes Return with Inflation on Horizon

Yields on the 10 year Treasury have been climbing consistently over the past several days, ending above 3.7% today. Increasing interest rates are welcomed by insurers and consumers who are still considering an annuity purchase. The trend is troublesome, though, for those who have recently locked themselves into a fixed annuity without inflation protection. Similar to the 1970s and 1980s, global investors are driving up interest rates in light of concerns about inflation that could be ignited by...

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