What is an Annuity
When the word annuity is spoken, many investors are not even sure of what is being discussed. They have heard of annuities, and perhaps attended seminars where annuities were discussed. But if you were to ask most people, what is an annuity, you might get wrinkled brows if not blank stares. So, the first question is always, “what is an annuity?” Simply put, an annuity is a financial account that can be used for 401k and IRA rollovers that are issued by legal reserve insurance companies. More specifically, life insurance companies. Health insurance companies and car insurance companies do not issue annuities. Only life insurance companies issue annuities.
Five years ago, many people who are buying annuities today or transferring into annuities with their 401k, 403b or IRA plan, would never have thought of an annuity. But today, things are much different. The artificial stimulus to prop up the stock market is not fooling anyone. Banks are making more money than ever, but are still paying zero on savings accounts. The fed wants more investment in stocks, but in growing numbers, retiring baby boomers are discovering annuities, especially hybrid annuities. Its not surprising that baby boomers would want a retirement vehicle built especially for them that would guard them from stock market losses while garnering a share of upward markets. Baby boomers want everything all the time. So a financial vehicle that is short on guarantees and long on promises will not do. Hybrid index annuities are long on guarantees and low in fees, a pleasant and welcome combination in today’s financial environment.
What kinds of annuities are there? At the most basic level, there are four kinds of annuities: fixed, variable, immediate, and hybrid annuities, which combine some of the most popular features from all annuities. Remember, annuities are financial accounts issued by legal reserve insurance companies designed to provide security in retirement. Fixed annuities are like savings accounts. Variable annuities are like mutual fund accounts, immediate annuities 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. The most important task is to find which kind of annuity gives you the most peace of mind and helps you achieve your income goals now and in the future. Annuities are built for the long run and have never failed in more than 150 years of history. In fact, the first annuities were offered in 1720 by the Presbyterian Church for ministers, and in the early 1800s by John Hancock Life. Today, millions of Americans enjoy the benefits of annuities.