As a greater number of American baby boomers are nearing and planning for retirement, financial advisers and retirement planners often suggest that they include at least some annuities within their retirement portfolios and plans. The reason for this lies in the fact that the majority of annuities offer guaranteed principal protection and a minimum annuity payout amount, regardless of stock market fluctuations and performance. A number of annuity companies exist which offer these products to investors.
When an individual is looking for a reliable and well regarded annuity company, he or she should consider a number of factors. First of all, an annuity company should offer a variety of different annuity products. Among these should be both fixed and variable annuities. Briefly, fixed annuities pay out a guaranteed income amount literally each month. Market changes have no bearing on this promise, and this makes this kind of annuity perfect for retirees. Variable annuities instead provide payment amounts which change as the market changes. Over time, they usually offer superior returns to investors, however, any given month's payout could be insufficient to maintain a retiree's lifestyle. Good annuity companies should also feature annuities which provide a protection for cost of living increases, so that the person's buying power does not decline along with constantly rising inflation. Finally, reliable annuity companies ought to offer products with guaranteed principal protection and a minimum interest accrual rate per year, regardless of how the stock market performs any given year. They ought to offer premium protection which will ensure that the entire value of the originally deposited investment in the annuity is paid back out, either as a lump sum, or in monthly payments that continue (even after the person in the contract is dead) until all the money has been returned.
How Safe are Your Annuities
Annuity companies' financial strengths are critically important to the contract holding investor. In fact, perhaps the most critical element in buying such an annuity proves to be the financial strength of the holding company. The reason for this is that if an annuity company fails, its annuity contracts fail along side it. Can this really happen, and if so, how often has it happened? Significant annuity company failures have in fact happened. This has transpired more than sixty-two different times since the Executive Life Insurance Company failed in 1991. Sixty-two failures in twenty years is frightening for many near retirement aged people. The silver lining is that annuity contracts are safeguarded against the insolvency of an insurance company up to a state specified dollar amount, which is generally $100,000. It can run as much as $500,000 in the states of Washington, New Jersey, and New York. One has to remember, though, that such comfort is not insurance provided by a government agency, but it is offered by a group known as the Guaranty Association. Decisions on reimbursements are typically made on a case by case basis in the event of an annuity company collapsing. Needless to say, investors should only ever consider investing with the most highly rated annuity providers.
Are Annuities Held by Banks or Insurance Companies
Annuity companies are generally insurance companies, and not banks. This is an important distinction for several relevant reasons. In the last three years, Americans have begun to understand that many major banks have become financial casinos, who took their own and their customers' monies and invested these in dangerously risky assets linked to continuously rising home prices. When these home values precipitously declined, hundreds of banks totally collapsed, including the largest savings and loan institution in the history of the United States, Washington Mutual. Insurance companies typically invest their money in better diversified and safer vehicles. This is not always the case, though, as AIG was the world's largest insurance company until the housing and financial crisis totally destroyed it in the last two years.
Among the annuity companies offering highly rated A+ to A- annuity products, with rates which are guaranteed for minimally ten years, are the following:
North American Company
American National Insurance Company
West Coast Life
Lincoln Financial Group
American General Life Insurance Company