Annuities Explained

The History, Make-Up & Advantages

Annuities are offered by Insurance companies and sold through licensed agents. The insurance company must be evaluated and licensed in your state as does the agent. State insurance commissions scrutinize Insurance companies to ensure they have reserve funds, commonly referred to as State Legal Reserve Pools, in place to protect investors before granting insurance companies licenses

If an insurance company goes out of business other insurance companies licensed in state must assume bankrupt insurers obligations and liabilities. Note that this protection protects fixed-rate annuity holders only, with some protection afforded to variable annuity owners. They are very similar to CDs offered by banks. Just like banks insurance companies offer different rates and returns on annuity investments.



Advantages of Annuities:

All annuities have three primary advantages: Tax Deferral, Avoidance of Probate, and a Guaranteed Income (optional) for a fixed period of time, or income for life. More specific reasons to invest in fixed and immediate annuities:

• You need to safely create wealth for your heirs
• You need tax-deferred growth
• You need your principal and interest guaranteed
• You need your heirs to avoid probate upon your death
• You need an increased death benefit
• You need stock-market linked gains without the downside risk
• You have money that is designated for inheritance
• You do not need more than 10% liquidity annually