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.

Waiting to Annuitize Makes Sense in Current Interest Rate Environment

In general and all other things being equal, it is better to hold-off on annuitizing an existing annuity contract if possible in the current environment. First and foremost we are in a low interest rate environment, so current annuitization locks-in those low rates. Second, there is the possibility of missing out on future growth of the contract value. Yet another good annuity-related article from the Chicago Tribune. Source: Chicago Tribune Full Story

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Professor David Babbel Fixed Indexed Annuity Study

Submitted by tom on Sat, 06/20/2009 - 16:27

I received the following question from MJM in Hawaii:

Where did you finally locate the actual study I have looke everywhere and cannot find it Thanks, mjm in Hawaii

I could not find the study anywhere online either. Professor Babbel was kind enough to provide access to it.

I will be publishing some of the specific results early next week.

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David Babbel

Where did you finally locate the actual study I have looke everywhere and cannot find it Thanks, mjm in Hawaii

Thanks for the question. I will actually move this to the forum section and create a new topic there under annuities.

Short answer is that the study is not published. Prof. Babbel was kind enough to provide access to it.

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Australian Financial Services Executive Advocates Compulsory Annuitization

The head of an Australian financial service firm's life operations, Richard Howes, is an advocate of compulsory annuitization . Howes believes that 30 percent of retirement funding should be compulsorily assigned to guaranteed income streams--in other words to annuities. Howes also suggests that the relatively slow take-up of annuities in the Australian market is a result of investors who have been conditioned by a uninterrupted 20 year bull market in equities. Howes spells-out the case for...

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Standard and Poor's Raises Outlook on The Hartford

S&P raised its ratings outlook on The Hartford Financial Services Group from negative to stable. The Hartford had received a series of ratings downgrades in light of the financial crisis and its impact on the company's variable annuity business. The ratings revision appears to be attributable in large part to the $3.4 billion in TARP funds that The Hatford received from the federal government. S&P considers The Hartford's life and annuity subsidiaries to be at "A" (strong) levels...

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