And now, here’s your Fixed Index Annuity TOP TEN Countdown… while we are definitely not the Casey Kasem version of counting down the top ten annuities, we can be somewhat entertaining as we help you stay informed concerning the ten top questions about fixed index annuities… [Top 10 list is continued below video]
Video: Watch as Dick and Eric tackle these 10 crucial questions one by one…
Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.
- Is this a fixed index or variable annuity#;
- What are the ratings of the insurance carrier;
- How long has the carrier been in business?
- What are the minimum **guarantees?
- What are the limiting factors for growth of the cash account?
- What are the contractual **guarantees for ;
- Death Benefit
- Long Term Care
- Growth Components
- What is the company’s renewal rate history.
- Is the fixed index annuity more optimal for Income, Growth, Long Term Care or Death Benefit?
- What is your States, Guarantee Association Limits for Fixed Annuities.
- In the worst case scenario will the contractual **guarantees meet your retirement objectives.
Don’t like our list check out this one from Forbes which is more focused on variable annuities#.
By: Deborah L. Jacobs
Annuities have become big business. Baby boomers are retiring in record numbers. Having experienced the market turmoil and uncertainty of the past five years, many of them want investments that offer an element of stability and security.
When chosen carefully annuities can protect consumers against outliving their money and protect against stock market volatility–features which are not available in traditional stock or mutual fund^ accounts. But with his protection comes additional costs, restrictions and fees, which consumers must review before considering an annuity purchase.
An annuity contract is a method of converting wealth into a stream of income. An investor gives money to an insurance company. In exchange the insurance company agrees to provide the investor with a benefit at a future date. The two most common promised benefits are an immediate life-long income stream (an “immediate annuity”) and the promise of growing an account balance into the future (called a “deferred annuity”).
Immediate annuities are contracts in which the buyer pays a set premium in return for a promised annual payment to that person and perhaps the surviving spouse. The size of an annuity payment (generally expressed as a monthly payment), is based on the age of the purchaser when the annuity begins and actuarial assumptions about the individual’s life expectancy.
Deferred annuities credit accounts annually. The crediting rate is based on a fixed promise; equity and bond performance; or a combination of elements. Deferred annuity contracts do not provide an immediate income stream but instead are a long-term tax-deferred investment. Recent demand for retirement plan rollovers coupled with **guaranteed elements in deferred annuity contracts have created a surge in product sales.
As the annuity business has grown, insurance companies have begun offering a variety of contract types, features, bells and whistles. Product innovation and competition can be fantastic for consumers. Unfortunately, they have also made things so complex that it may be difficult to understand what you’re buying. Before signing on to one of these arrangements, make sure you understand which annuity contracts, if any, are right for you and what type of additional contract features may be worth added costs. Here are some questions to ask.
1. Will the insurance company selling me the annuity be able to make good on its promises? Credit ratings matter. Consumers have little other objective information to determine the likelihood they will receive their promised benefit in the future. So it makes sense to ask for the exact rating of an insurance company.
Do not be satisfied with potentially misleading phrases such as “good,” “great,” “consistent” or “strong.” Insurance companies are rated by AM Best, Fitch, and Moody’s as well as Standard and Poor’s. AM Best ranks superior companies as A++ and A+. Moody’s, Fitch and S&P rate top quality insurance companies between AAA and A. Consumers should be wary of purchasing an annuity contract sold from an insurer with less than an AM Best “A” rating, or purchasing any contract from a salesperson who is unable to provide an AM Best rating.
2. How much will this contract cost annually, including all expenses? Annuity contracts are generally more expensive than mutual fund^s. The richer the **guarantees carried by a contract, the higher the corresponding costs will be. Deferred annuity contracts will generally charge:
An administrative fee (typically from 0.10 to 0.25%). This fee covers reporting, generating reports, online security and account access. Administrative fees may be waived for accounts with initial balances of more than $1 million.
Mortality and expense fees (typically ranging from 1.0% – 1.5%). These fees are used to provide insurance death benefits if the contract holder passes away and to compensate the insurance company for risks associated with holding the contract.
Mortality and expense fees will vary based on how much the insurance company has promised to pay at the death of the owner. Simple death benefit options, such as promising to return the current account balance to the contract owner at death, will have lower mortality and expense charges (0.5 – 1.0%) than those promising more sophisticated death benefits (such as a multiple of the contract premium), or elaborate calculations taking into consideration the highest contract value on specific contract anniversary dates (1.0% – 2.0%).
Fees for any additional optional benefits. These benefits, such as **guaranteed minimum returns or sustainable lifetime withdrawals, will add to the cost of a contract. While additional features vary widely by insurer, they can generally be pooled into “income” related features, “death” related features or “access” related features.
Income features **guarantee that a cash flow stream from the contract will continue uninterrupted regardless of market fluctuation. Income features vary dramatically by insurance companies but generally range in annual cost between 0.5 – 1.5%. Consumers who do not currently need withdrawals from the annuity contract should consider their options carefully before purchasing this type of benefit.
Death features are generally wrapped into the mortality and expense charges of a contract. The simplest death benefit is a return of the initial premium paid to the insurance company. More complicated features promise an elevated death benefit of some sort. Death provisions can be complicated and are often not needed by consumers using annuities as an investment and retirement tool.
Access features, such as being able to withdraw account dollars free of any early withdrawal penalty in the event of a terminal illness, disability or long-term care need, are common in today’s annuity contracts. Access features may be standard in some contracts but may carry additional cost in others.
In addition to these fees, variable contracts will also charge direct or indirect asset management fees. All totaled, a deferred variable annuity# will typically range in cost between 1.75% annually, for a contract with few bells and whistles, to over 3.25% annually, for a contract with income and death benefit **guarantees. Understand the exact purpose of each fee and compare fees across insurance companies before you purchase a variable annuity#. [Read More… ]
Using OutCome Based Planning™ for Your Retirement
We practice and recommend a "Holistic - OutCome Based Planning™ process when considering annuities." This approach has the effect of balancing your overall portfolio so you can meet your retirement objectives by "first identifying the least amount of your investments or savings (if any) that should be considered for annuities." OutCome Based Planning™ analyzes and models multiple outcomes so you can clearly identify your best income and growth opportunities.
"The Annuity Guys will only call if you request help". Hence, when you are ready for specialized help we will be available."Working with an Experienced Fiduciary Financial Planner can help you Avoid a Trial & Error or Risk Based Retirement"
This type of approach does take considerably more time, effort and analysis which will show you mathematically the successful possibilities by comparing various outcomes rather than trying to sell or convince you of that "so-called one best solution." Clients frequently tell us that this process removes some of the confusion and emotion to help them objectively identify a better retirement plan; rather than just ending up with the most convincing salesperson or advisor.
When requesting help you can be assured of working with an experienced Annuity Guys' Retirement Planner who is independently insurance licensed and securities licensed as a fiduciary financial planner having access to the vast majority of annuity companies in helping you choose the best annuities using a holistic-outcome based planning approach. We consider the high quality advisor recommendations we make to our website visitors as a direct reflection back on our commitment to serve all client's with a high standard of excellence in financial planning for retirement.
Based on survey feedback on advisors from our website visitors, we eliminated about two-hundred local advisors and now only recommend a few that we consider experienced vetted Annuity Guys' Fiduciary Advisors. Many local advisors continue requesting us to recommend them as a vetted advisor. However, our reputation and future business is driven only by satisfied website visitors. So, unfortunately we've had to tell the vast majority of local advisors no, since we changed our business model four years ago. At that time we stopped trying to satisfy everyone with local advisors, we now primarily work with individuals who are comfortable using today's internet technology to their fullest advantage by working with a select group of vetted, experienced and knowledgeable Annuity Guys' Fiduciary Planners.
Selecting the Best Annuity & Retirement Income Advisor
Are you willing to work with one of our retirement and annuity advisors based on their experience and expertise as a first priority rather than being limited by a local or regional area? The good news is that technology has forever eliminated our geographical limitations and leveled the playing field for everyone! As a result of today's technological advances, all of us can now work confidently with experts in any field including personal finance. We are no longer confined by regional or local boundaries limiting our choices and ultimate success. A high quality advisor is now as close as a click or phone call away.
"There is no room for trial and error when it comes to choosing MarketFree® Annuities or a Successful Retirement Planner."
"There are no undo buttons in retirement so it is vitally important that you do it right the first time!"
We are fortunate to have a select few who we believe are truly the highest qualified advisors out of about two hundred licensed insurance agents that we eliminated. Your survey feedback is what helps us make these tough decisions. Our advisors have an independent financial practice, specializing in annuities and retirement planning, which helps ensure that you are given the best options available for your retirement planning.
"It takes an experienced expert to know how to structure annuities for income, inflation, growth, return of principal, and tax advantage."
"Anyone can sell you an annuity; however, it takes a truly qualified and experienced advisor to know how to structure them for income, inflation, growth, return of principal, and tax advantage. Typically, there is not just one that can accomplish all of these objectives. It is how an advisor structures multiple annuities in balancing your total portfolio that makes it possible to achieve your most important retirement objectives."
Why Searching for the Best Annuities on Your Own Can be so Frustrating...Almost everyone nowadays turns to the internet for answers on everything - from buying new widgets to researching just about everything under the sun; and finding the best annuity is no exception!At first, it may seem that researching will be straightforward but the more time you spend researching them, the more frustrating it can be. Why is this? First of all, it does not take long to realize that gimmicks abound - such as warnings and alerts from salesmen who just want your attention so they can sell you one or the "too good to be true" claims of 8% to 14% **guaranteed interest and of course the claim that you can get the full market upside with no downside risk! If you have done any research you have heard all of these claims in advertising which are mostly half truths and not fully explained.So how can you find the best annuities on the internet? The truth is... you can't! And what is even more frustrating is all the conflicting points of view from so called experts. There are well over 6,000 different annuities - all designed for different reasons, so is it any wonder that the deck is stacked against the average researcher or do-it-yourselfer. Add to that the fact that they pay high enough commissions to attract a plethora of both good and bad agents. This does not make annuities good or bad; they are simply a financial tool that truly benefit those who use them correctly.How can you find the best annuities for your unique situation?
- Use the internet cautiously;
- Work with a vetted and experienced specialist;
- Do not settle for that one dubious best plan. Compare multiple Outcome Based Plans to decide on the one that is truly best for you;
- Be keenly aware of scare tactics and hyperbole - avoid those advisors and websites;
- Avoid websites that are focused on rushing free reports, rates and quotes to get your contact information they are rushing you to speak with them, instead, take your time and choose someone you are more comfortable with that works on your time-table;
- Know the Five Vital Factors (listed above) that an experienced specialist must answer before helping you select the best options for your situation;
- Watch this telling video "Avoid Annuity Gimmicks, Amateurs and Charlatans"...
** Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Annuities are not FDIC insured and it is possible to lose money.
They are insurance products that require a premium to be paid for purchase.
Annuities do not accept or receive deposits and are not to be confused with bank issued financial instruments.
During all video segments, Dick and Eric are referring to Fixed Annuities unless otherwise specified.
*Retirement Planning and annuity purchase assistance may be provided by Eric Judy or by referral to a recommended, experienced, Fiduciary Investment Advisor in helping our website visitors. Dick Van Dyke semi-retired from his Investment Advisory Practice in 2012 and now focuses on this website. He still maintains his insurance license in good standing and assists his current clients.
Our vetted and recommended Fiduciary Financial Planners are required to be properly licensed in assisting clients with their annuity and retirement planning needs. (Due diligence as a client is still always necessary when working with any advisor to check their current standing.)
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- MarketFree™ Annuity Definition: Any fixed annuity or portfolio of fixed annuities that protects principal / premium and growth by remaining market risk free.
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