Annuity Rates

 Annuities are the series of payments made by an institution like an insurance company to the annuitant (annuity holder) over a fixed time period. The payments are fixed by the company. Annuity rates are the rates of return that the annuitant will. Rates will depend on the nature of the annuity.

In the case of fixed deferred annuities, the rate of return is guaranteed over the life of the insurance contract. On the other hand, variable deferred annuities will not give any guaranteed return on the annuity. This is because; the amount obtained by the insurance companies from fixed annuities is invested in low risk government securities and bonds that guarantee some income. But the amount from the variable annuities will be invested in high-risk securities. However, the main advantage of variable annuities is that the excess income above the premiums from these annuities is exempted from tax. The two important factors that affect the annuity rates are gilt yields and life expectancy. In most of the countries, annuity rates have been on the decline. Sometimes the annuity rates depend on the market conditions and the monetary policy of the Government.

Every annuity holder wishes to have higher rate of return on the annuity. In order to achieve higher annuity rates of return, one needs to shop around for a good insurance company. Moreover, the potential holders need to have an idea of what types of securities the company invests in. If the investments perform well, then the likelihood of enjoying higher returns is possible. Potential holders may seek professional advice from annuity brokers or agents.



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The Other Problem with the Equity Indexed Annuity

Okay, so here is the other problem with the index annuity. Many agents try to sell it as the 'answer to all problems.' The fact of the matter is, it is not that at all. An indexed annuity is designed to have the potential to capture a little more upside than a traditional fixed annuity can.

Again, many agents claim it is a way to beat the markets...they will severely underperform in a good bull market. Furthermore, they are not designed to capture all the upside. They are designed to give a lower floor and a higher ceiling than traditional fixed annuities. They are by no means a stock market alternative.

So the bottom line is that the equity indexed annuity can be something desinged particularly to fit in someone's portfolio. It has advantages that other annuities cannot offer. It gives the protection of a fixed annuity. And it gives a little more upside than traditional safety vehicles.

All in all, it can be a good thing but it depends on an investor's situation. For someone looking for all the upside and who doesn't care about taking risk and losing money, the index annuity is far from the right choice. For someone who has a small risk tolerance but cares to have a little more upside potential, it can be a good choice.

The most important thing is to understand, any investment is part of a bigger equation. That is the bottom line. And furthermore, research is key. It is important to know what you are getting into. The further side of the spectrum is agents saying that EIA's are a scam. Those guys just don't understand how the EIA works.

Ignorance is Not Bliss.Tony Bahu is a licensed annuity agent who has helped many men and women own the annuity that is right for them and their family.