Understanding the balance annuity rates and annuity ratings play in choosing an annuity is a key in making the best annuity choice for your retirement. Third party rating companies should play the dominate role in helping determine the claims paying ability of an insurance company for you as a consumer. So, just how much weight should be placed upon the rating alone is the $64,000 dollar question! Is it a good decision to chose a carrier or product based upon high ratings alone – or do high annuity rates and great consumer benefits play the determining role?
Unfortunately, most annuity purchasers do not understand that the 8% percent roll-up is a future income growth formula that is not available to them as a lump sum withdrawal. Thus, potential annuity clients are pitched on a 8 percent compounded return; so, they often don’t comprehend that when the salesman says growth for future income, what the salesman really means is that you can only use the 8 percent roll-up number to calculate future income. You cannot make a withdrawal to get the whole amount with 8 percent growth and then go buy a new home in Florida. In a prolonged low rate environment like we have been experiencing, it can be hard to just say NO when we hear some of these high rates of return that are not fairly explained. So, just be sure to clarify that the rate offered will generate an outcome that will meet your financial objectives. The good news is that some annuity providers have seen the confusion that has arisen from these offerings; and are designing products that are easier to understand while prohibiting agents from using “unfair smoke and mirrors type marketing tactics” to produce more business. Just remember what your mom always told you… “If it seems too good to be true, it probably is…”
[continued]…50% equities and 50% fixed annuities. We typically do not espouse an exact percentage, but rather design our income plans to cover the foundational expenses with sources like social security, pensions and annuities. If you take care of the foundation the flexibility with your additional assets can be significantly enhanced.