YourCreditCompany.com Official Blog

Maybe you’ve heard the old adage that annuities are the exact opposite of life insurance.  That with life insurance, you pay “a little” each year into a contract, called a premium which purchases risk leverage and pays a lump-sum death benefit to your heirs.   Alternatively, an annuity calls for a set amount “deposit” or lump sum placement which grows over time to pay out an income to the annuitant following a pre-determined period of time; years.Well, pretty much forget about what you think you know about annuities or even any preconceptions, and open your mind wide.  First, and foremost, we think is the legislative gift of tax-deductable growth of deposits.  Think of a mutual fund or ETF or mini stock portfolio, even a real estate or commodities, gold, energy (oil and gas), some form of contractual platform where you deposit money now to hopefully build and multiply as rainy day money; your nest egg enhancer.When structured properly and acquired for all the right reasons, annuities represent one of the very best vehicles/mediums to efficiently accumulate money for a known or probable event sometime down the road, at least 10 years; age 60 or older.  The apparent aftermath of the recession and investment accounts downturn points us increasingly towards the annuity configuration possibilities.Randy Myers recently authored a timely ‘special advertising section” report published in the Wall Street Journal and elsewhere.  While clearly representing the interests of the life insurance and fund management industries, he made some really good, salient points which deserve edification and expansion and expansion.  His “Will You Have Enough” by-line sets the table beautifully for the key message of this promotional piece (sponsored via display ads by John Hancock, Prudential, and Fidelity).  That “for many baby boomers who saw their retirement accounts battered by the financial market upheaval of the past two years, the case for buying annuities is becoming stronger”.As Joan Bloom, Executive VP of Fidelity Investments Life Insurance Co. (an annuity underwriter) largely got right with “…an annuity is the only other product (besides a pension) that can provide guaranteed income in retirement”, this unique product can assure regular income, beat inflation, and minimize taxes simultaneously.Assuming that enough is never “enough” taking a hard look at annuities makes a lot of sense.  The investment options are endless, as varied as vanilla mutual funds, and the awesome tax deferred growth feature (an unlimited Roth IRA?) more than offsets somewhat higher fees and early surrender charges outside of the “fee-free corridor”.For our money, the biggest basic question is Fixed or Variable.  If you choose a fixed product, the strength of the underwriting company is absolutely paramount.  As with banks or any investment, what good are higher returns if your company breaks its promise (read the fine print!) or goes broke?  Fixed annuities count entirely upon the investment and expense management savvy and solvency of your company.Variable annuities offer exposure to the stock, bond and other markets which introduces a higher degree of risk, but with a higher return opportunity as well.  With both, you may make additional contributions at any time without upsetting the deferral of income payments.To close, if you have exhausted your tax deductible and qualified tax deferred retirement vehicles, you definitely should consider an annuity(s) to make up the difference between future projected income needs and current availability.Learn more at Your Credit Company