Jefferson City, MO  Annuities

I did not know much about annuities until 2009. In the midst of the worst recession since the Great Depression of the 1930s, my in box in 2009 was being bombarded by employment opportunities with insurance companies. I found this to be quite odd given the horrible employment situation at the time. Nobody else seemed to be hiring except for insurance companies that appeared to be desperate to add sales staff. The reason for this hiring spree by insurance companies was a great uptick in demand for safe guaranteed investment returns by investors who had pulled their money out of the highly volatile stock market that had just suffered one of its worst crashes in history. During 2009 and in the years immediately following, weary stock market investors began to explore and then invest in annuities to secure a decent return on investment in a relatively safe manner. Investing in annuities suddenly became popular with Main Street America, and insurance companies needed to boost their sales staffs to meet the new demand for their annuity products.

An annuity is defined as a contract or agreement by which one receives fixed payments on an investment for a lifetime or for a specified number of years. By law, annuities are offered only by life insurance companies, and any growth within an annuity account is held tax-deferred until it is withdrawn, at which time it is treated as regular taxable income.

There are two basic types of annuities, Multi Year Guaranteed Annuities (MYGA) and Indexed Annuities. MYGA offer relatively modest rates of return that are fixed, in a similar fashion as Certificates of Deposit (CDs). Indexed Annuities offer rates of return that depend upon the performance of the S & P 500 Index. With Indexed Annuities, there is guaranteed protection from declines or drops in the index. They generally offer guaranteed minimum rate of return and on some a maximum rate of return.

Annuities offer a safer investment return than investing in the stock market. What annuities offer that index and mutual funds do not offer is safety with fees that are far less if existant at all. Investors that cannot stomach stock market turmoil, such as the turmoil that occurred during the severe stock market bear market in late 2008 and early 2009, can sleep easier holding annuities that offer a guaranteed rates of return. While savings accounts offer similar guaranteed rates of return, the current savings accounts interest rates of less than 1% are often considered inadequate by investors eager to see their money grow over time for their retirement.

The reason why annuities are popular investments is because unlike investing money in the stock market and riding out the volatility until the money is needed, annuities can be used to guarantee an investor will receive a specified minimum level of return and payments in the future, when needed. These payout options are more geared for those who worry they could run out of money while in retirement and want to guarantee this doesn't happen. Those payout options include: 

1) Guaranteed Income Rider – A rider on an indexed annuity that allows minimum withdrawals from the invested amount without having to annuities the investment. The amount that can be withdrawn is based on a percentage of the total amount invested in the annuity. This guaranteed income can be withdrawn over a period of years, your lifetime, or your lifetime and your spouse's.

No Annuitization Required

You want to find a guaranteed income rider that does not require you to annuitize your contract in order to exercise the rider. What does that mean? It means you can withdraw a guaranteed amount each year (5% for example), but if you needed to, you could still access your remaining principal (although doing so may reduce the amount of guaranteed income you could withdraw). It also means upon your death, any remaining funds are still available to pass along to heirs.

2) Free Withdrawal Provision – The amount that an annuity contract owner may withdraw each year without incurring any early withdrawal fees. This amount varies, but typically is 10% per year until the surrender charge period has expired.