Why Annuities?

In today’s economic times, many people are concerned about their retirement security. Owners of 401-K, SEP-IRA, Roth-IRA and other retirement accounts have experienced losses in recent months. Annuities provide a supplemental retirement vehicle that can preserve original premium payments while reducing the risk of loss.

Annuities can be another component of a long-term retirement plan. Product security, bonus interest credits, and product flexibility are key features that make annuities attractive. In addition, the product is protected by each state’s Corporate Insolvency Guarantee Fund. Insurers pay into this fund to protect account holders of businesses that become financially unstable or insolvent.

AM Best ratings are available to consumers free of charge. These ratings provide up-to-date information on the financial situation of insurers. When curious about an agent’s insurer, consumers should check out the rating details available at AmBest.com. Insurers are rated as safe, from A++ to B+, or vulnerable, from B to F. Understanding these ratings prevents consumers from purchasing annuities from insurers that are financially unstable.

Fixed and equity-indexed annuities offer benefits and flexibility for risk-averse consumers. Both products offer collateral interest credits on fixed accounts. Some insurers offer bonus interest credits for the first year or the first five years of the contract. Equity Index Annuities (EI) allow beneficiaries to participate in obtaining higher interest credit. This is possible by changes in the S&P 500 or Dow Jones during a year. Unlike mutual funds or stocks, however, a reduction in the index does not result in a reduction of the annuitant’s original premium payment.

When considering why annuities for a retirement plan, consumers should consider the safety, protection of the original premium payment, and the income potential of the product.