More on annuities 3 1 2023

 Annuities gush cash ? 

Because of my article a few weeks back on triggered annuities (my term), I received more than the usual amount of emails.

In response, I thought I would lay out some more details about annuities in general.

An annuity is a contract between you and an insurance company. You can obtain annuities through banks, advisors, insurance agents or financial planners, but only insurance companies write the actual policies. The companies are usually multi-billion dollar entities, highly regulated with publically available financial ratings which you can find easily on the web.

The buyer of the annuity pays one lump sum to the insurer or can elect to make regular installment payments over time depending on preference.

The insurer promises to pay you back either in periodic payments or in a lump sum. Annuities can be tax deferred, meaning during the growth period your investment may compound at a greater rate than one subject to yearly taxation.

Basically there are three types that fall into two categories. The three types are:

Fixed, variable, and fixed-indexed (my favorite).

Fixed annuities offer a fixed and guaranteed rate of return. Much like a CD or any other type of investment that offers an interest rate back to the customer, fixed annuities do basically the same thing.

Variable annuities track an underlying investment such as a stock market or hybrid index and its payments and value can go up or down depending on index performance.

Fixed-index annuities, similar to a variable annuity, track an underlying “index” but may provide principal protection in a down market. An opportunity for growth exists when the underlying index performs positively within a measuring period but there is never any downside. The “triggered” annuity I wrote about falls into this category and may offer a guaranteed return no matter what. Find the past “Triggered” annuity article here (www.moneymanagementradio.com).

The two categories of annuities are immediate and deferred.

An immediate annuity starts paying you back as soon as you sign the contract, while the deferred annuity starts the payments sometime in the future.

For a long time, I was not a big fan of annuities and in my opinion, they were sort of the wild west of investing. Many were complicated, fee expensive and convoluted.

However, in recent years, I find many have been simplified, streamlined and constructed in a way that is easily understood and easily explained. And a few are downright brilliant. My opinion of course.

Annuities are not for all investors but they do have their place, and in many cases help alleviate the stress of up and down markets. As explained above, some offer guaranteed returns and some offer 100% principal protection yet possible stock market participation in up markets without the downside. One could argue the best of both worlds.

Keep in mind, variable annuities DO have downside risk, so make sure you understand the difference between a fixed and variable annuity.

A common complaint about annuities in the past is buyers of annuities lock up their money for the duration of the contract, making it in essence an illiquid investment. This is not entirely true in today’s annuity environment as many annuities allow for periodic withdrawals up to a certain percentage of the account without penalty.

In a nutshell, properly selected, and quoting from my favorite types here, certain annuities can guarantee your entire investment thereby eliminating the stress that comes with the ups and downs of today’s markets. Simply put, one has the possibility to participate in up markets, yet not take part in the down ones and possibly even earn interest during that time. You can withdraw a portion of your cash if needed, and avoid the bite of the tax man by the deferment quality of the investment.

Annuities don’t have to be complicated. In fact, they shouldn’t be. If you find one that is, look elsewhere. There are many offerings out there that may meet with your risk tolerance and investment expectations and are easy to understand.

As always, make sure you understand all the ins and outs of any investment you are considering. A capable financial professional should be able to help you navigate the annuity options out there in a way that is simple and easy to understand.

Annuities may not be for everyone, but for some, they might be exactly what the doctor ordered.

“Watching the markets so you don’t have to”

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(As mentioned please use the below disclaimer exactly) THANKS   (Regulations)

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Annuities are not FDIC insured and guaranteed by the underlying insurance company. Early withdrawal penalties may apply. See your tax professional for all tax inquiries. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. (530) 559-1214..