Hurricane Sandy devastated the Atlantic Seaboard, the national election has come and gone, but your money is still safe and sound. Think of the simplicity the annuity brings to your life. No fees, no loads, no risk. You have a product that will fund Baby Boomer retirement. It isn’t stocks. It isn’t bonds. Nor is it mutual funds. It’s fixed/indexed annuities.
What are the issues confronting the U.S. at this time? The answer is multi-level, but can be summed up as:
1) Collapse of an economy (potential)
So what keeps these annuities safe? Remember these are not investments, they are deposit accounts backed up by cash on hand, i.e., insurance companies must have the money to compensate the annuity holder in case they should go out of business. This is required by state law (The State Guarantee Fund). Furthermore, the insurance company doesn’t borrow money to make investments, they are not expected to make payouts right away, and they don’t make risky and speculative investments. How many of you are worried about your homeowners, your auto insurance, your life insurance company going under? Why is the annuity treated any differently? It is all the same insurance industry. Keep in mind, the insurance industry was the last man standing during the Great Depression when banks and investment firms went south. Then, as now, the industry remains the last bastion of financial freedom.
Safety is not an issue with fixed annuities. 100% of all annuity funds must be backed up with 100% available assets. In other words, the fixed annuity company has their portfolio already in place to back the contractual guarantees. Their cash flow originates with the general portfolio.
Conversely, investments base their account values on sub accounts consisting of stocks, bonds, and mutual funds. These kinds of accounts generate risk and fees.
Annuities provide a level of economic security that can’t be duplicated by other investments like stocks, bonds, CDs, etc. Why? Because annuities relieve the consumer of the need to set aside additional sums of money to offset risk and fees to manage the account.
So if fear of management of your own retirement accounts paralyzes you and causes you stress, simply pass it to a risk bearer, an insurance company, and let the annuity provide you a safe and secure income.