The Three Biggest Misunderstandings About Annuities.
Don’t be mislead by annuity gossip.
Misunderstanding: If you die owning an annuity, the company keeps the money.
Annuities are contracts and as such have a designated beneficiary. In the event of death, the amount of funds in an annuity are passed immediately and directly to the beneficiary without the need for probate. By naming a beneficiary, the time delay, the cost and expenses associated with probate are avoided. In the event the annuity has been changed by the annuity owner to an income annuity the remaining account value in the annuity can be inherited by the beneficiary. (many available options for income annuity) In most annuity contracts the beneficiary has numerous options available for selecting the method of receiving the funds. These options can include lump sum or time payments.
Misunderstandings: Interest rates
Guaranteed interest rates are low. What options are available for the consumer without exposure to risk? Currently, annuities are offering the highest interest rates available.
1. Bank accounts guaranteed by the FDIC. Bank rates are tied to the Federal Reserve through their “discount” rate relationship with member banks. If the Federal Reserve wants interest rates low, they achieve this by setting rates with banks. The best website for current rates is www.bankrates.com.
2. US Treasury options: US Treasuries are the safest possible option for your money, but these rates are also low. Demand for borrowing in the general economy can help increase the competition for higher interest rates for US Treasuries, but already owned assets will remain fixed. The best website for US Treasury rate information is www.ustreasury.gov.
3. Fixed annuities. Many annuity companies offer fixed guaranteed interest rates, and the period can be from 3 to 10 years. The interest rate is set and guaranteed. The best website for current interest rate information is www.annuity.com.
Misunderstanding: Annuity companies: Annuity providers, not annuity owners, are the primary beneficiaries of an annuity purchase. Annuities re highly regulated by each state department of insurance. Annuities provide benefits that can enhance an individual’s life. Benefits can include, lifetime income, guaranteed rates of returns, avoidance of probate and so very much more. Annuity products can vary widely. It is essential to ask questions about product features, guarantees, benefits, and any possible fees before making any final decision.
A qualified and licensed annuity specialist can assist in sorting through the hundreds of retirement annuity products that are available.