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.

Marc Faber on the Possibility of Hyperinflation in the United States

Noted investor and publisher Marc Faber believes that the United States will ultimately experience inflation rates that approach the extremely high levels seen in Zimbabwe during the past year: “I am 100 percent sure that the U.S. will go into hyperinflation ,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.” Faber has been a...

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Financial Crisis Will be Seen Fundamentally as a Crisis for Retirees and Near Retirees

Professor James Galbraith provided a keynote address at a recent industry conference sponsored by NAVA—the Association for Insured Retirement Solutions.

Professor Galbraith comes from the Economics department at the LBJ School of Public Affairs at the University of Texas at Austin. A Keynesian and an author most recently of The Predator State, Professor Galbraith has been a consistently strong and vocal advocate of government stimulus and intervention in response to the financial crisis.

Professor Galbraith’s basic message is that...

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Fixed Annuity Sales Continue to Soar While Massive Inflation Risks are Ignored

Bloomberg reports that there is continued strength in fixed and immediate...

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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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How do annuities protect against inflation?

This is a super important question and consideration--particularly given the financial crisis and our current economic environment. There are some comments on this topic throughout the site including this blog post.

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