In the midst of these unprecedented times, there is a lot of concern about money – not just everyday stimulus/disaster relief money, but retirement funds and accounts. Conservative investors what know about their best options for growth and safety.
Our clients are concerned about reliability, security and a fair rate of return on their deposits. Due to recent market and interest rate trends, fixed annuity sales are up.
They had their best year since 2008 last year, and with interest rates starting to tick up, these accounts are looking more and more attractive. Annuities offer better rates than CDs, money markets and many bonds, but they do it with no risk to your deposits.
Are Fixed Accounts Reliable & Protected?
The biggest question, however, is: How safe are annuities as an investment vehicle? Because annuities are insurance products and are specifically built for long-term growth, they have none of the volatility like you see with stocks and bonds. This makes them a very safe long-term investment.
Fixed annuities are one of the very few investment products that are backed by insurance companies. And insurance companies are not allowed to lend your deposits to anyone – or leverage them into risky investments like banks and financial institutions can. Deposits go into a general account that primarily owns government treasuries. That’s what makes them so safe.
Are Annuities Insured Against Losses?
Modern accounts have been around for over 120 years and have an exemplary track record. They are not affected by market rises and falls. We are not aware of anyone who has lost a dime in a fixed annuity because the insurance company backing the product failed.
In fact, most accounts are insured up to $250,000 – the same amount as FDIC – but with much less risk. This insurance is run by each individual state. You can lookup yours through the Annuity Guaranty Association where you live.
Can I Lock-In A Fair Rate Of Return?
When banks are only paying half of one percent and many annuities yield well over 3%, it’s a no-brainer on where to invest money you want to keep safe.
Policies can be as short as 1 year, while others are much longer, even up to 20 years. The sweet spot for most consumers are guaranteed fixed interest accounts in the 3-5 year range. With these plans, your rates do not fluctuate for the entire term of your chosen policy.
Annuities can also be used to create a guaranteed stream of income for a set amount of time – either a fixed period (usually 10-20 years), or for the life of the policyholder. Others simply withdraw their interest each month and leave the principal alone. You have a great deal of flexibility with most fixed annuity policies. Some prefer to defer their taxes while others use the income on a regular basis.
Purchasing an annuity should be done with careful consideration and with the help of a qualified insurance broker. Think annuities might be right for you?
Contact us today!