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Imogene LewisBroderick
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Imogene LewisBroderick   My Press Releases

Annuity Investment Options

Published on 1/22/2014
For additional information  Click Here

ANNUITY INVESTMENT OPTIONS 

Part 1

It is important that financial professional do their homework about any investment option that they would recommend to a client.  This is even more important when an annuity is the investment vehicle that will be recommended.

INVESTMENT OPTIONS

There are three basic annuity investment classification options available that an annuity investor can choose from. Annuities can be classified as fixed, fixed indexed or variable and is based on premium investment choices.

 FIXED ANNUITY

A Fixed Annuity is a contract agreement between an insurance company and an annuitant that promises the annuitant/owner an exact income amount of income paid at intervals for a specified period or until an event occurs.

A Fixed Annuity Provides:

·         A guaranteed minimum rate of interest, credited to the purchased contract;

·         Income(annuity) payments that are fixed throughout the contract period;

·         A guaranteed specific dollar amount for each payment and the length of time, for the payments as specified by the settlement option that the annuitant chose.

Annuitant Concern

A Fixed Annuity gives an annuitant peace of mind because the annuitant knows the precise amount of each payment that will be received during the annuity period, allowing planning.  This type of payment is called a “level benefit payment amount”. This level benefit payment amount has one major disadvantage for the annuitant.  Because a fixed amount of money not invested to provide growth that matches at least the inflation rate, the annuitant’s power when not matching inflation rate, the annuitant’s purchasing power will erode over time.

Insurer Concern

The insurer in a fixed annuity contract bares the investment risk.  All future interest rate actually paid out to the annuitant, by the insurance company is based on the return performance of the insurer that cannot be sure that the rate will not drop below the annuity guaranteed rate.

Insurer Investment

Based on investment experience, the insurer will invest all principal amounts, during the accumulation period, to be able to give the annuitant the guaranteed rate, which is usually about 3%, specified in the contract or the current interest rate, whichever is higher.

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