It's not just about purchasing a guarantee from the annuity company, it is the protection of principle. Sure the volatility is taken out of the equation. Yes, the exchange or rollover bonus from 5-10% is nice. Ask yourself to the best of your knowledge, has there been an insurance company that couldn't pay its claims or provide income as promised to annuitants? AIG came close, but they have made tremendous progress to repay their debt. They own American General out of Texas, and it is a very strong performer for them. To the best of my knowledge, there is not an insurance company that couldn't pay its claims or provide income as promised to annuitants.
I know in the days to come, there will be a person that walks into their local bank, sits down and purchases a CD with a very modest 1.5% rate, and I do occasionally run into this person and I will be blunt in out conservation...FDIC is what I hear 9 or 10 times out of ten. If you are along the same lines as the bank customer, I urge you to do your research and formulate your own opinion of FDIC. If it works, get in line for that interest rate that doesn't keep up with inflation. If it doesn't I urge you to email, research, or even call me for information about some of the best Fixed-Income annuities (FIA's) on the market. If we don't do business, at least you will have a good idea why to not sit down and grab onto that 1.5% rate. Go to my website: www.prospectsfinancial.com and visit the "Library" link. You will find a Wharton article of FIA's for you to read. As with any financial product, strategy, policy or contract...please research and read what you're about to agree to in writing.
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So people do think that Annuities investments. There’s an important difference between investment and contract. Investments involve risk. Contracts involve the transfer of risk from you to another party. When people buy annuities, they buy guarantees that transfer the risk of losing money to an insurance company. Annuity buyers actively seek to limit investment risk. Annuities permit financial risk and reduce it at the same time. This may add to the public confusion about annuities. But that’s precisely why people buy annuity contracts… to control risk rather than avoid it altogether.
ReplyDeleteHey Neil, thanks for your comment. I use FIA's regularly, as a way to limit exposure in the market, protect the principal and hopefully see a modest return in a turbulent time. Although the investment box teaches us they're making money somewhere, a retired couple in their late 60's, I feel, shouldn't be waking up and watching the business report everyday. And hey, if they can get a bonus of 5-10% day one, that's a bonus! I agree with you, the public's knowledge of annuities is limited at best. This for me is one reason that in my children's foundation we teach introductory fiscal responsibility to our members. Why the U.S. schools don't do this, I don't know. I think it is time for education reform regardless of a party affiliation. Thanks again, check out my websites, www.prospectsfinancial.com and www.louisvilleprospectsfoundation.org
ReplyDeleteAppreciate the comment, feel free to always comment! Take care.