Baby Boomers are Loving Annuities….That’s right! Although very popular in its many forms, the annuity isn’t for everyone. Interest in these stalwarts of the financial sets industry has exploded in recent years. The aging of the population, the decline and disappearance of pensions, equity market upheaval, and inventive annuity product design are all contributing factors to the billions of dollars flooding in to these insurance products. So why can’t you have one? We’ll analyze that question and give you insight in to what is going by your financial professionals mind as he evaluates your interest or request for an annuity.
Annuities, Annuities, Everywhere
There are many types of annuities, but we will do a deeper exploration of the fixed annuity. These annuities are contracts with insurance companies with no investment in equities, (simply meaning no mutual funds or any kind of security). They pay a rate guaranteed for one year and then revive yearly at a rate the insurance company declares.
Here Are Some Other Types of Annuities:
1. Multi-Year Guarantee Annuities Sometimes called Certificate of place (CD)-kind annuities that pay a guaranteed rate for a guaranteed period, usually ranging from one to ten years.
2. Indexed Annuities: These credit interest by tracking, but not participating in different indices, the S&P 500 being one of the most popular.
3. Immediate Annuities: These may pay a lifetime income, an income for a defined period, or a combination of the two based on your age and the amount of money contributed.
Annuity Research, Annuity Smarts
If you are researching annuities as a consumer you may have heard about some of the great features and benefits an annuity delivers.
Some of The Most Obvious Advantages:
- Tax Advantages
- Competitive Rates of Return
- Probate Avoidance
There are also income riders, premium bonuses, and a myriad of bells and whistles. What does it all average to you, the consumer? Well, it could very well average nothing. I say this because financial products are a method to an end, and in this vein, a specialized in the financial sets business will not start the conversation with benefits and features of products and strategies.
Think Like Your Financial Advisor
A good advisor will start out with some very clear questions. These questions will determine your goals, your values, your attitudes and dreams. There is never a cookie-cutter answer to the very human questions about your money.
Annuities are used predominately with pre-retirees or retirees, I said predominately, because the world isn’t black and white and each solution and recommendation will vary. Retirement is certainly not mandatory and it could manifest itself in countless ways as you age.
As your financial advisor begins to thoroughly understand your expectations and you communicate clearly with one another what your goals are, your advisor begins to focus on a plan.
Here are some questions that need to be answered if annuities are considered for your financial portfolio:
1. Where is the money now? Is it in a bank account, CD or retirement savings?
2. What is the money for? Retirement, rainy day savings, pass on to heir or charity?
3. Is the money in a Qualified Plan? Is the plan tax deferred?
4. What state is your dominant residence? All products are not offered in all states.
5. How is your health? Health can play a role in certain annuity payouts.
6. What percentage of your liquid assets does this money represent? You must have enough money obtainable.
7 When and how do you expect access to the money in your annuity? Have a plan for when and how much money you receive.
You CAN Have an Annuity
Annuities are versatile products meeting many needs. They are designed and are to be used in the accomplishment of your goals. If you talk to a financial expert that has the skill and care to understand what you’re trying to accomplish you might be the proud owner of annuities. Then again, you just may be told you can’t have one. With a good advisor you will know why, and agree!