Why Annuities Might be Worth Considering Right Now

Jan. 22, 2012  |

Written by

Scott Lunsford

Are you frustrated with the interest rate your bank is paying you? Can’t quite handle the twists and turns of the stock market?

Are you interested in an investment that is paying 3.25 percent and is guaranteed never to pay less than 2 percent? Would access to 10 percent of your balance each year be important to you? Would you like your money to bypass probate when you die?

Maybe you should consider an annuity.

Many people think annuities are complicated. Some annuities are, but this column is going to address a fixed annuity.

A fixed annuity is no more complicated than your bank certificate of deposit. A CD and an annuity are savings plans. A CD is bought at your bank, and an annuity is bought from an insurance company.

Annuities, however, are tax-deferred, offer competitive interest, have lifetime guarantees, offer 10 percent withdrawals from your account without a penalty, offer a lifetime monthly income and offer more flexibility.

Many people shy away from annuities because they have a reluctance to invest money with an insurance company because the banks feel “safer.” Let me ask you a question: If a tornado swept through town and destroyed your home and car, how would those items be replaced? By your insurance company, right?

So, if you’re like most people, your home and car are your most valuable possessions. You trust the insurance company to be there in your time of need. If you trust the insurance company to replace or repair your possessions, doesn’t it make sense that the insurance company can take care of your money as well?

I never have seen interest rates at banks lower than they are now. The stock market is unpredictable at best.

I would argue that never has there been a better time to consider an annuity.

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• 

A Story: Understanding Derivatives

I don’t know where this example (story) came from but it’s worth sharing.

 A Primer: Understanding Derivatives

Heidi is the proprietor of a bar in Detroit …

She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon she has the largest sales volume for any bar in Detroit .

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.

Consequently, Heidi’s gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi’s borrowing limit.

He sees no reason for any undue concern because he has the debts of the unemployed alcoholics as collateral!

At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS.

These “securities” then are bundled and traded on international securities markets.

Naive investors don’t really understand that the securities being sold to them as “AAA Secured Bonds” really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb – and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi’s bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons.  But, being unemployed alcoholics — they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and Heidi’s 11 employees lose their jobs.

Overnight, DRINKBOND prices drop by 90%.

The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Heidi’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the BOND securities.

They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, nondrinkers who have never been in Heidi’s bar.

Now do you understand? 

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• 

Webinar: Effects of Current Low Interest Rates on Life and Annuity Insurers

In light of current economic conditions, I thought this A.M.Best webinar might be informative for those of you with Life and Annuity policies. Below is the information and link.

A panel of analysts from A.M. Best’s Life/Health Rating Division will review new research on the effects of the ongoing historic low interest rate environment on life and annuity insurers. The one-hour webinar is set for Wednesday, November 9 at 2 p.m. ET.

To share this event with a client or colleague, please forward this link: http://www.ambest.com/webinars/rates2011

Panelists will discuss:

• Challenges life insurers face in achieving target interest spreads

• How reserve adequacy testing of interest-sensitive business could influence statutory reserving

• The impact of reduced investment income on writers of long-term  care and long-term disability business

• How the low-return environment is affecting variable annuity hedging programs

• The impact on earnings as companies unlock assumptions, resulting in increases in write-offs for deferred acquisition costs

Panelists for this webinar will include:

• Ken Frino, Group Vice President, Life/Health Rating Division

• Rosemarie Mirabella, Managing Senior Financial Analyst

• George Hansen, Actuary & Managing Senior Financial Analyst

Attendees can submit questions or comments at news@ambest.com. Questions and comments will be discussed before and during the live event. Coverage of the webinar will be featured in BestWeek, BestWire, Best’s Review and worldwide media outlets.

For more information about the webinar, please call (908) 439-2200, ext. 5561, or e-mail lee.mcdonald@ambest.com.

Best Regards,

Lee McDonald

GVP, Communications

A.M. Best Company

Note: Your privacy is important to us. Please visit http://www.ambest.com/privacy.html to view our online Privacy Statement. Also visit http://www.ambest.com/terms.html as all content provided by A.M. Best is subject to our Terms of Use statement.

A.M. Best Worldwide Headquarters, Ambest Road, Oldwick, New Jersey, 08858, U.S.A

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• 

Financial Survival in the New Economy: Preparing for Disaster

Perhaps you think that, based on recent market surges, that the recession is over, that we’re well on our way to recovery and happy days are here again. I hate to be the bearer of bad news but nothing, in my opinion, could be further from reality.

Read these quotes, if you dare, but check your blood pressure when you’re done:

“The U.S. is fast approaching $15,000,000,000,000.00
in national debt. This is mathematically impossible to
ever pay back … even if every American was taxed at 100%.”
- Charles Goyette, The Dollar Meltdown

“By 2015, through interest payments alone, the U.S.
will have singlehandedly funded 4x growth in China’s
military strength”
- Mark Steyn, After America

“23.4% of Americans are Currently Unemployed
… not the 9.1% they’d like you to believe.”
- ShadowStats.com

“There are currently 5 job seekers for every 1 job
opening in America,forcing wages down by 10% since 2007.”
- The Wall Street Journal, October 13, 2011

“Adjusted for inflation, the average yearly earnings for an American
male are lower in 2011than in 1978.”
- The Wall Street Journal, September 14, 2011

“1 out of every 5 Americans is on government
support of some sort”
- The Wall Street Journal, October 5, 2011

“America will lose its position as the world’s
superpower in less than 10 years.”
- Goldman Sachs, 2011

“We’re actually in a depression right now.
They just don’t want us to know that.”
- Anonymous

“If we don’t do something soon … our recovery
is on the verge of faltering.”
- Ben Bernanke, The Fed, October 2011

“The stock bubble of 2001 and the housing bubble of
2007 were mere sideshows for what’s coming.
The main act is just around the corner …”
- Chris Martenson Ph.D., The Crash Course

I don’t know about you but I don’t think we’re out of the deep water yet.  In fact, I believe the worst is yet to come.  But I still believe there is hope for those that prepare.

I’ve written a number articles on the strength and safety of Insurance companies and annuities.  I still believe that when it all hits the fan the insurance companies will remain standing and provide an excellent safety net with Annuities, Life Insurance (with life benefits), Nursing care insurance and the like.  Now I don’t have a securities license but I read and pay attentions so here’s a few other suggestions that might help:  (BE WARNED – THESE ARE SURVIVAL STRATEGIES AND MAY SEEM RADICAL TO SOME!)

BUY GOLD SILVER AND PRECIOUS METALS:  In the event of a total collapse at least these have intrinsic value.

STOCK UP ON CIGARETS, LIQUOR AND OTHER ADDICTIVE PLEASURES:  Not that you’ll use them personally but if there is a period of time like the Weimar Republic and hyperinflation takes control money may be valueless so these items can be used as barter.

KEEP SEVERAL MONTHS OF CASH ON HAND:  In the event of a collapse, catastrophe or other overwhelming event there may be a period of time that banks shut down so it’s wise to keep a reserve on hand.

START STOCKPILING FOOD FOR A MONTH OR MORE SUPPLY:  In the event of major downturn there is likely to be a run on groceries.  The average city or town only has a 3 day supply of food.

HAVE CANDLES, LANTERNS OR OTHER ALTERNATE SUPPLY OF LIGHT: Needless to say there may not be any electricity for awhile.  Think about all the things you have that run on electricity and find an alternative to fill the gap.

BUY A GRILL IF YOU DON’T HAVE ONE:  Along with a supply of propane, wood or charcoal.  Gas and electric may go down and what are you going to cook on.

IF YOU HAVE A FIREPLACE, STOCK UP ON WOOD:  It may be in short supply after a crises so like all good boy scouts “Be Prepared”.

SELL ANYTHING YOU HAVEN’T USED IN OVER A YEAR:  It’s time to clean house, streamline and get rid of the excess baggage while you can.

PUT ALL YOUR LEGAL DOCUMENTS IN PLASTIC SLEVES IN A BINDER WITH EASY ACCESS:  In the event you were forced to leave your town or city for safety in the country, you need these documents handy to take with you: mortgage, insurance policies, birth certificates, medical docs and more.

HAVE A BACKPACK READY WITH AT LEAST 3 DAYS OR MORE SUPPLIES:  For the same reason as above.  If this go bad and the violence we are now seeing in our major cities escalates and you live in or near these areas it may become advisable to leave before it escalates.

There are a lot more survival tips available out there in web world.  Just do a google search or go to the library to get your brain thinking.  Hopefully you won’t need any of this advice.  God willing things might get better…for a time.  The Bible does say that as the end draws near the darkness will grow so I don’t hold out much hope.  Remember the quote, “Chance favors the prepared mind!”  GET PREPARED!!

Helping to secure your financial future.

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• 

Annuity ABC’s from Allianz Life

Allianz is a highly rated insurance company offering a variety of great Annuity options. Check out these 3 free videos from them: RETIREMENT REALITIES, ANNUITY BASICS AND ANNUITY MYTHS AND TRUTHS.

Just follow this link: https://www.allianzlife.com/GetInformed/ABC_Annuities.aspx

To your financial freedom,

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• 

459 BANKS IN IMMEDIATE DANGER OF FAILING! IS YOURS ONE OF THEM?

So many folks are gauging their investments by the Market.  It seems to be defying gravity as it continues to rise.  But, in my opinion and the opinion of many professionals, it’s only a matter of time before the bottom falls out.  Unemployment remains high, today the blue chips shed more than 170 points at open after Standard and Poor’s downgraded its outlook on U.S. sovereign debt to negative from stable.  This and more combined with the following troubled banks should make you take pause and think about where you’re going to find a safe haven for your fragile retirement funds.

Fixed Indexed annuities are a perfect choice to help protect your funds.  Insurance companies are strong financially and provide excellent guaranties along with reasonable rates of return along with guaranteed income for life.

Here’s the list as of April:

The Top Ten Banks in Danger of Failure as of April 18, 2011 are:

1. Nexity Bank, Birmingham, AL – Failed 4/15/11
   
2. First Choice Community Bank, Dallas, GA
   
3. Valley Community Bank, St. Charles, IL – Failed 2/25/11
4. One Georgia Bank, Atlanta, GA
   
5. Georgia Heritage Bank, Dallas, GA
   
6. CreekSide Bank, Woodstock, GA
   
7. First Sound Bank, Seattle, WA
   
8. The First State Bank, Stockbridge, GA
   
9. Bartow County Bank, Cartersville, GA – Failed 4/15/11
   
10. Patriot Bank of Georgia, Cumming, GA

Here’s the full bank list.  You’ll notice there are no Credit Unions mentioned as they are regulated differently. If you have a Credit Union, visit the National Credit Union Administration Financial Performance Report to check it’s status.

THIS IS VERY IMPORTANT INFORMATION SO PLEASE PASS THIS ALONG TO YOU DEAR RELATIVES, FRIENDS AND NEIGHBORS.  JUST HIT THE EMAIL SHARE BUTTON AT THE BOTTOM OF THE PAGE.

Many blessings,

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• 

The Role of Life Insurance & Annuities for Your Income After Retirement

I’d like to welcome our guest author, Angela Brown.  Angela is a contributory writer associated with few US-based financial and Wisconsin debt consolidation community and has written several articles for various financial websites. She holds her expertise in the Debt industry and has made significant contribution through her various articles.

It is very important to plan your retirement much ahead of time. If you do that you will be able to lead a stress free retired life later. Now, there are various kinds of investments and you may choose any one to have a financially secure tomorrow. Life insurance and annuities too play an important role in regards to your retirement income. If you have good income in your retirement age, you will be able to pay off your debts. If you are in Wisconsin, and if you need the help of a Wisconsin debt consolidation company to pay off your debts, you will be able to use this money to make payments to this consolidation company.

Role of life insurance in retirement income

Life insurance is can help you earn during your retirement. Life insurance is something that offers both protection and value at the same time. Insurance policies, especially cash value life insurance provides you tax-free cash flow however through a combination of the policy loans and the withdrawals. But the withdrawals and the loans will reduce the death benefit and the cash value offered by the policy.

Another advantage of life insurance policy for your retirement income is that the income that you get from your life insurance is not subject to tax penalties till you become 59 ½ years of age. Moreover, a customer can pay as much as he wants to or as less as he wants to in annual premiums. But, you will have to talk to the insurer about the minimum payments or else to low a payment can result in lapse of the policy.

Another important part about life insurance is that if the insured person dies even before saving good amount of money for retirement, the insurance acts as the income for the spouse.

Role of annuities in retirement income

Annuities too are a great way to save money and generate income for your retirement. You can buy a life annuity after getting a life insurance policy of the equal amount. When you do this, you ensure a monthly payment for your life. This is insured annuity. The advantage of such an annuity is that the older you get the lower becomes the portion of the annuity that is taxable. However, this may vary according to the states.

With the help of an annuity you are doing away with the tension of outliving your capital. The life insurance company takes away this tension. The grater the years you live, the greater will be the benefits that you may get. There are also various kinds of annuities according to your needs.

To your safe retirement,

Angela Brown

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• 

RETIREMENT INVESTMENT ADIVCE: The Power of Annual Reset In a Volatile Market!

As most investors would attest, the stock market has been a rollercoaster ride over the past several years. We have seen huge moves in both directions, and volatility has become commonplace. No one can predict what the future holds as it relates to the stock market, but many market experts believe that volatility is here to stay for a while.

Check out this recent article from one of those experts. If market volatility is in fact here to stay, wouldn’t it make sense to allocate some of your Retirement Investments to products that will insulate you from potential future market swings?There are many options to choose from, but one strategy to look at would be fixed indexed products with an annual reset strategy.

Fixed indexed products are great in volatile markets because they:

1. protect YOUR Life Savings during bad times and
2. let’s YOU participate in earnings during good times.

In a positive market fixed indexed products will perform well, but their upside performance potential may be limited somewhat by the caps, spreads and other measures that the insurance company has in place.

In a negative market, fixed indexed products will protect YOU from loss, but they will not generate a positive return. Volatile markets that have good years mixed in with bad years are the markets that truly show the value of fixed indexed products with an annual reset chassis.

To illustrate this point, let’s take a look at how a hypothetical fixed indexed annuity product and a hypothetical fixed indexed life product would have performed in a real life volatile market. One of the world’s most volatilestock markets over the past 20 years has been the market of Japan. Japan’s stock market, the Nikkei 225, closed at 37,133 on December 1st of 1989. 20 years later, it closed down over 74% at 9,572.20 on December 1st 2009. Today, the Nikkei 225 sits around the 10,000 mark. The 20 year period from December 1st 1989 to December 1st 2009 included 11 negative years and 9 positive years, so it is a great example of what a volatile market can look like.

So, how would a fixed indexed product with today’s features have performed in the Nikkei 225 from 12/1/89 to 12/1/09? Let’s take a look.

We will assume that the fixed indexed annuity product is one with an annual reset design, 100% participation in the index, and up to a 5.5% annual cap. We will assume that the fixed indexed life product is one with an
annual reset design, 100% participation in the index, and up to a 13.5% annual cap.

The chart below illustrates how these hypothetical products would have performed if they were indexed to the Nikkei 225 from 12/1/89 to 12/1/09 and had the assumed features/caps listed above.

As you can see in the chart below, the client would have been up over 50% in the hypothetical indexed annuity and over 130% in the hypothetical index life product. This is compared to a 74% loss that the client would have shown had they been directly invested in the Nikkei 225 during this period. This example shows the power of an indexed product with an annual reset design.

I trust you’ve found this information useful. To better evaluate how using a Fixed Indexed Annuity with annual reset might affect your retirement nest egg, don’t forget you can always get a retirement income analysis at no cost or obligation to you. To learn more, just click on “I Want MY Retirement Income Analysis NOW!”

Safe Savings

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• 

Video: Food Court Flash Mob Sings Hallelujah Chorus! Merry Christmas from Roger Ely!

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• 

New 4.5% fixed Annuity for Your “Parked” Retirement Savings!

Most of you have wisely moved out of the market to safe money options.  Unfortunately, the most popular options of CDs & Money Market aren’t paying squat!

How ’bout a Fixed Annuity with a 7 yr. surrender and a 4% guaranteed rate of return?  If you’d like one with a shorter term, I also have a Fixed Annuity that offers 4.5% for the first year and then 3.5% for years 2-5.  These rates still beat CD’s and Money Market & probably will for the foreseeable future.

THIS IS A LIMITED TIME OFFER so don’t procrastinate!

Most pundits are still saying that the markets will get worse and probably fall to all time lows before this recession is over and will take years to come back.  These Fixed Annuities offer:

1. Safety (no loss guaranteed)
2. Tax deferral (no 1099′s on interest earned – triple compounding – make interest on your money, on the interest & on the money you would have sent away as a tax.
3. Guarantees
4. Liquidity (interest can be taken twice yearly)
5. Income options
6. Shorter term

For more information just drop me an e-mail at roger@financialprotectorsinc.net or request a free analysis.

Safe savings,

Roger Ely

PS:  If you found this helpful please hit the “like” button, tweet it out to your network and leave a comment!  Thanks!

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