What are Annuities?
What are Annuities? Annuities are financial accounts issued by legal reserve insurance companies designed to provide security in retirement. Annuities come in several varieties. Some annuities are like savings accounts, others are like mutual fund accounts, some start paying an income immediately, and some annuities—known as “Hybrid” annuities—combine all of these benefits in one multi-purpose vehicle. So when you ask, what are annuities?… you will find many answers. Keeping it simple, annuities are financial accounts that have a long track record of paying reliable income to Americans regardless of how bad the economy gets. In times like these, that’s reassuring.
Annuities come with contractual guarantees that you get in writing. Some annuities come with more guarantees than others and are called fixed annuities and fixed index annuities. These annuities are built on a foundation of reserves to back every dollar in the account. The safety record on fixed annuities is even better than bank accounts. Fixed annuities have made it through two world wars, the 1929 crash, the Depression, 911, and the mortgage meltdown without losing money. Many retirees in Phoenix are considering annuities for their IRA rollovers because of the safety and security factor, combined with stable income that can’t be outlived.
There’s a fear factor in the financial markets today that didn’t exist five to ten years ago. After two severe market declines and a historic recession, the fear is warranted. Market declines have whipsawed life savings and worn down investors of all ages. Hit hardest are retirees and pre-retirees who know time is no longer on their side. They ask, what are annuities, because they are concerned that time will run out on their dream of a monthly income of $2,000 to $5,000, or even $10,000 a month guaranteed. For a retired couple accustomed to having a six figure income being deposited into their checking account, the shock of retirement combined with a market downturn is more than most people retiring in Phoenix want to experience. That’s why so many people are asking the question, what are annuities? Annuities are the only financial vehicles regulated by state government agencies that pay permanent lifetime income.
Because interest rates are rather low on plain fixed annuities, many retirees are also asking, what are hybrid index annuities? Hybrid index annuities combine the key features that smart retirees are looking for in a financial plan. No one wants another big loss in the stock market, but no one wants to sit in cash or see their money stagnate. Hybrid annuities combine the safety of fixed annuities with some of the upside of variable annuities, and the ability to pay strong stable guaranteed income for life, in one easy to own account.
Investors constantly balance their desire for the highest possible returns against their desire to guard against big losses. For many people, that balance was thrown off in recent years with the wild swings in financial markets. The prospect of further downturns has left them shaken—and more cautious. Hybrid index annuities address the problem squarely and without fanfare.
The fear factor is real when investments have to last for 30 years or more in retirement. There are no do overs or mulligans. Hoping the markets go up is not a strategy. Today, many retiring engineers, retiring teachers, and retiring business owners want at least sixty five percent of their money guaranteed against loss, while at the same time paying an income that is capable of funding all their needs. They’re asking what are annuities when they see the risk in stocks and bonds. Annuities are uniquely equipped to provide income stability and the missing pension income stream that anchored previous generations. What are annuities? They are the answer to the riddle that many retirees are faced with. Find more answers in the MyAnnuityGuy.com™ special guide, Annuities Made Simple.