Top 27 Annuity Articles from Non-Biased Sources

Annuities are not always easy to understand. The problem is that you main source of information might be your financial adviser… who will eventually make money if he sells you one. Therefore, it’s pretty hard to get a non-biased opinion on whether or not you should purchase an annuity.

 

I’ve searched the web for several hours and read over 100 articles about annuities. I’ve published the top 27 articles about annuities from non-biased sources. I’ll be updating this list if any good article comes to my attention so don’t hesitate to contact me and provide me with more interesting articles!

top 27 annuity articles

Annuity Calculators

 

How to Calculate the Present Value of an Annuity @ Financial Mentor (US)

This is a simple and easy to use calculator to understand how annuities work. You can understand how much yield the Life Insurance Company is giving you for your money.

 

Level Vs Index-Linked Annuity Calculator @ Candid Money (UK)

This calculator helps you making the difference in payments from a level and index-linked annuity.

 

Calculating the Value of An Annuity in Excel @ Experiments in Finance (US)

If you are comfortable with Excel, this tutorial shows you how to build your own annuity calculator.

 

Annuities Explained

 

Personal Finance 101: How Does an Annuity Work? @ Simple Dollar (US)

Trent is concerned about guarantees offer by the Life Insurance Company in regards to your annuity if the organization experience financial problems. Please note that part of your annuity may be insured by the Government. You must contact your adviser to find out if your contract is insured as laws vary from countries to countries.

 

10 Things Seniors Need To Know About Purchasing Annuities But Don’t! @ Saving Advice (US)

This is definitely a good article to start your research about annuities. This covers major pitfalls to avoid prior to purchase an annuity contract.

 

Is a Reverse Mortgage Annuity a Good Deal? @ Wealth Pilgrim (US)

Reverse mortgage annuities are using your property value as a payment (similar to taking a mortgage on your house to cash its equity) and provide you with an annuity. This product has been made for retirees who wish to keep their house but look for an additional source of income.

 

How To Earn Income For The Rest of Your Life: The Good, Bad and Ugly of Annuities @ Gen X Finance (US)

You can find additional info on fees and riders in this article. Annuities are definitely the cheapest product in the financial industry.

 

Fixed Annuities: Maximize State Guaranty Coverage Limits @ My Money Blog (US)

If you are concerned about guaranty coverage on your annuity, this article will explain you how to maximize your guaranteed and sleep well at night.

 

Is an Annuity The Worst Investment a Young Person Can Make? @ Good Financial Cents (US)

This is an interesting take on annuities for younger people. Most articles about annuities are written for seniors, this one explain if younger investors should look at this product as well.

 

Secondary Market Annuities: A Low-Risk Way To Earn Great Rates? @ Oblivious Investor

Mike explains how you can purchase secondary market annuities and the premium its gives compared to Government bonds. Depending on individuals, it could be a good investment or not.

 

Some Common Questions About Annuities @ Million Dollar Journey (Canadian)

This blog highlight several questions about annuities with plain and simple answer. This is definitely a great place to start your research.

 

How Annuities Can Help You Fight Groundhog Day @ My Own Advisor (Canadian)

Mark found an independent financial planner to write a detailed example of how annuity works with calculations.

 

5 Reasons To Include Annuities In Your Estate Planning @ Financial Samurai (US)

Sam provides an explanation of 5 major advantages of including annuities in your estate plan. Annuities are definitely a powerful financial product to use.

 

Level Vs Escalating Annuities @ Monevator (UK)

This is well explained article to highlight the difference between a level annuity (equal payments) and escalating annuities (also called indexed annuities where payments increase to protect your lifestyle from inflation).

 

Deferred Fixed Annuity: A Good Idea For Retirement? @ Money Ning (US)

This article is about deferred annuities with some mentions about pitfalls such as the teaser rate offer on the first year of the annuity contract to attract investors looking for yield.

 

Annuities Explained @ Magical Penny (UK)

Some crucial info about how annuities work along with their pros and common pitfalls.

 

3 Risks To Consider Before Investing in Fixed Annuities @ My Personal Finance Journey (US)

Jacob talks about how inflation, interest rate and low liquidity risks could affect your choice of purchasing a fixed annuity.

 

Understanding the Ins and Outs of Selling Structured Settlement Payments @ 20’s Finance (US)

Annuities are a structured settlement product. This article explains how the contract works between each party.

 

How To Use Variable Annuities The Right Way @ Amateur Asset Allocator (US)

For most investors, variable annuities are poor solutions because of their high management fees. However, there is a way to use variable annuities for your own good.

 

If You Could Buy a Gold-Plated Government Pension, Would You? @ Money Smarts Blog (Canadian)

A critic looks at annuities and its main flaws; it doesn’t leave any money for heirs in most cases.

 

Index Annuity Traps: The Truth About Equity-Indexed Annuities @ The Digerati Life

Equity-indexed annuities are far from being cheap and their investment return is capped. This article points all the major flaws of this product.

 

Could an Annuity Be The Ticket To Reliable Retirement Income? @ Smart on Money (US)

Peter does a good job listing four things to consider prior to purchase an annuity.

 

Annuities: If You Aren’t Getting 2.5% on Your Investments @ The Chicago Financial Planner (US)

Roger, a financial planner, rises some red flag questions to ask your adviser if you consider buying an annuity.

 

What is an Annuity? @ Investor Junkie (US)

Sometimes, straight to the point articles are the best source of information. If you don’t want to waste too much time understanding annuities, this article is for you.

 

Is Variable Annuity Tax Deferral Worth Paying For Again? @ Nerd’s Eye View (US)

This is an article about the true worth of tax deferment characteristics attached to variable annuities.

 

Adding an Annuity to Your Retirement Plan @ One Smart Dollar (US)

This article discuss how annuities can be use within your retirement plan to assure a basic level of income stream.

 

Personal Experience with Annuities

 

Should Annuities be Part of Your Retirement Plan? @ Retire by 40 (US)

Joe is taking his own personal situation to analyse if an annuity is worth it for him or not. It appears that he is a little bit too young to purchase an immediate annuity and prefer the flexibility and higher potential return from his dividend portfolio.

What is an Annuity?

 

 

When we arrive at retirement, we all wish we could simply receive a monthly pay check and keep-up with our hobbies. Imagine a retirement without stress; imagine receiving a constant income stream for the rest of your life. Put it simply, this is what an annuity is.

 

What is an Annuity?

 what is an annuity

An annuity is a contract offered by Life Insurance Companies. In exchange of a lump sum of money provided by the investor, the Life Insurance Company guarantees a steady income stream usually paid monthly. In other words; the investor gives the Life Insurance Company his money in return to get a secured pension payment. You can look at the following video for an example:

 

Annuities Explained

 

Unfortunately, annuities could be far more complicated than this video. There are several types of annuities and their characteristics vary greatly from one product to another. This is not to mention the annuity cost where rates of return also depend on several factors.

 

This section has been built after receiving many questions from our newsletter subscribers. You can browse through the different article titles to find what you are looking for. You will find detailed answers to all your questions along with a straightforward point of view on annuities. If you are not already a subscriber, add your name and email address below and you will receive our free guide to annuity on top of receiving additional information about annuities:

Start Your Research Through Those Articles

 

You can click on any of those articles covering several aspect of annuities.

 

Is an Annuity Right for You?

Annuities Pros & Cons

Are Annuities Safe?

Annuity Death Benefits Explained

Annuity Pitfall and How to Avoid Them

10 Questions about Annuities (and their Answers!)

Annuities and Estate Planning

Annuity Unique Features

What an Annuity Contract Look Like

How to Structure Your Annuity

Annuities Myths & Realities

Annuities and Retirement

Who Can Sell Annuities?

Are Annuities Scam? 6 Flaws of Annuities You Must Read About

 

Are annuities scam? Do you think Life Insurance Companies invented this complex financial product to take your money and run? I don’t think there is a need to become paranoiac about annuities, they are not a scam. However, it doesn’t mean that annuities don’t have flaws.

 

#1 You Already Bought an Annuity and You Don’t Even Know

 

annuities scam

If you believe everybody should buy an annuity, you’ll be happy to know that we all have one. When you think about it, if you have ever worked, you have contributed to Social Security. This “Government pension plan” is nothing but a deferred group annuity. As long as you live as a retiree, you will receive Social Security payments. Unfortunately, those payments are not enough to cover for your yearly drip at the beach and pay for nice restaurants. Let just say it’s not the best annuity you could have bought. You will most likely need to purchase another annuity contract if you want to cover your additional expenses. On the other side, if annuities would be a scam, Government wouldn’t buy one for you.

#2 Forget About Your Money

 

This is probably the point where most people forget when they purchase an annuity; once you buy an annuity, you “lose” your money. You didn’t get scammed; you will still receive your monthly payment according to the contract you have signed. However, you won’t be able to withdraw important lump sum of money once the money is locked in the annuity. It is important to keep an amount as liquid cash for your emergency as the annuity is not the right product to access your money rapidly.

 

#3 There are No Free Lunches

 

The thought of receiving a guaranteed stream of income for the rest of your life is surely appealing. But there are no free lunches in finance and there is a price to pay to enter in an annuity contract. If you select a variable annuity, fees charged through mutual funds are above the market average. Insurance fees, distribution costs along with management fees apply on those contracts. It is not rare they exceed 3%. This is probably where you can call annuities a scam if you don’t do your research probably. There are simple and cheap annuities such as a standard life annuity. The more options and potential return you add to your contract, the higher your fees are going to be.

 

A good trick to reduce your fees is to buy immediate annuities with no riders (options) and subaccounts (mutual funds with high MERs). If you are comfortable with financial language, you can also purchase your annuity directly with the Life Insurance Company and skip the broker’s commission. However, this is recommended to go through an adviser or a broker if you require further assistance and financial advices. As I’ve written before, there are no free lunches: if you seek for quality advices, you will have to pay for them.

 

#4 Tax Deferment Doesn’t Rhyme with Tax Disappearing

 

Deferred annuities offer the possibility of your investment to grow tax free… or this is how it can be presented by some agents. It is true that the investment profit while the annuity grows is not taxable. This only means that you will not be taxed as long as you don’t start withdrawing from your annuity. Once the annuity starts to pays, your payment are subject to taxes. Depending if you annuity is qualified or not (read qualified vs non-qualified annuities to know the difference), the annuity payment could be a 100% taxable revenues subject to the same tax rate of any other income. Then again, annuity payments are not part of a big scam, it’s only a matter of understanding that annuities offer tax deferment but you will still have to pay taxes one day. If you don’t, this means that you will pass your taxes to be paid to your estate at your death.

 

#5 Annuities are Complex to Explain

 

If you are searching for the annuity formula, you will be disappointed. Basically, only the actuaries working for the Life Insurance Company knows about the magic formula. The worst part is that they can change the way they calculate the payment from an annuity from month to month.

 

If you seek for an annuity in exchange of an investment of $200,000, you may want to deal with a broker or call different life insurance company yourself. Each company has their own metrics based on life expectancy assumption, interest rate and market return potential along with managing their own book of annuities. If a Life Insurance Company sold too many annuities to 65 years old this month, they might decrease their annuity payment offered for next quotes to discourage investor from buying. Those actions are necessary to manage the overall risk of the annuity portfolio.

 

When you purchase an annuity, you agree to put your money in a black box form which you receive an income stream. Payments are guaranteed as per your contract but the way it is calculated is extremely difficult if not impossible to understand.

 

Your best bet is to contact a broker that will shop around to find the highest paying annuity for you. You can contact a trusted broker to get the best rate here.

 

#6 There are More Riders than You Can Count

 

Several kinds of riders are offered for all annuity contracts. A rider is an option you can add to your contract in order to customize your annuity. As you can imagine, the more you customize your product, the more expensive it becomes. You can add riders to improve your annuity payments, add a beneficiary, add extra withdrawals payments, etc. The more riders you add, the more flexible your annuity becomes. But there is a price to pay for each rider.

 

Ask for different simulations and compare them to the original annuity with no riders in order to understand how much you pay for each added option.

 

 

As you can see, annuities are no scam but they are fairly complex. There are very useful and cheap annuities but there is also very expensive one with unnecessary riders. It’s up to you to ask questions and wait patiently for complete answers. If you can’t get a clear answer to your question, this is a good sign you need to change adviser or you may scream for an annuity scam!

 

4 Important Risks at Retirements Solved By Annuities

 

 

Once you retire, you may think that you are done with risk. You can’t lose your job anymore since you don’t work. You can’t lose your house as your mortgage is most probably paid off by now. Then, there is not much to fear… or this is what you believe.

 

Unfortunately, there are several risks a retiree must face. Most of them are related to financial matters and can be solved with a little planning. For example, annuities can answer many of your retirement concerns. There are four risk annuities can solve at retirement:

 annuities and retirement

#1 Outliving Your Assets – You Still Live But Your Bank Account Died

 

One of the biggest risks at retirement is to spend all your money and still be alive. 50 years ago, when one retired, he had roughly 5 to 10 years to live. Today, you can retire as early as 55 or 60 and live until… 90! A life annuity could solve this concern quite easily. Since a fixed annuity is a guarantee stream of income until your death, you don’t have to worry about spending too much in your early days of retirement. You are set to receive the same pension forever.

 

#2 Loss of Spouse – Where Do You Find The Money?

 

We all know that living as a couple help cutting down on expenses such as rent, utilities and transportation. Once your spouse passes away, you are left to assume all expenses by yourself. This could be a problem if you haven’t planned it already. With a joint life annuity, you have the possibility of receiving the same pension payment after the first beneficiary deceases. Therefore, your budget is the same before and after your spouse passes away.

 

#3 Healthcare Assistance – How to Afford Nurse at Home

 

With aging population come healthcare growing needs. Several retirees prefer to stay in their home and require the help of a nurse from time to time. This is a good way to postpone your entry in a retired home. However, such service requires a good pension to afford it. This is where annuities come into play. If you purchase a longevity annuity, you will start receiving payments about the same time you may require healthcare services. This type of annuity is some kind of guarantee you can afford a nurse at home for a while and enjoy your place as much as possible.

 

#4 Inflation – What Used to Cost a Dollar

 

Inflation is definitely well hidden behind other retirees concerns. A small rise of 2% of your cost of living seems meaningless at first. But this is what makes a big difference if you enjoy retirement for the next 20 years. What used to cost a dollar will eventually double and this is true for most goods you purchase. Variable annuities allow the investor to increase its payment overtime. Since the investment return depends on the investment in the sub-accounts, you have better chance to match the inflation rate and keep your power of purchase intact during retirement.

 

Confused? Curious? You are looking for answers about annuities? Contact a trusted adviser that will take the time to explain you various options offered to you.

Is an Annuity Right for Me?

 

 is annuity good for me

If you have come to our site, chances are that you have been reading or hearing a lot of things about annuities. Since annuities are complex, they may have been simplified too much by some financial advisers which incurred horror stories ending in lawsuits. However, it is not because some investors got fooled by their advisers that annuities are evil.

 

In fact, the right question should not be “is an annuity right for me?” but “which kind of annuity match my needs?”. Annuities can be customized according to your personal financial situation. You can also combine more than one product to make sure that everything is covered.

 

Should I buy an Annuity?

 

If you go through the different types of annuities, you will learn more about each of them. You can also speak with a representative for free and inquire more information. But for now, let’s keep it simple and try to draw the picture of an investor with an annuity. Here’s a few hint to know if you are the kind of investor who could benefit from an annuity:

 

#1 You are concerned about your retirement plan. You see retirement coming in a few years and you want to make sure you will have enough money once you stop working. Being financially secured is one of your priorities.

 

#2 You are familiar with investments. You have been saving money for retirement and you have built your nest egg throughout your working years. You invested in either bonds, CDs, mutual funds or even managed your own stock portfolio. However, you feel uncomfortable with the market volatility and you wish to secure a part of your income at retirement.

 

#3 You are seeking for a stable stream of income. The bulk of your retirement plan is based on amount withdrawn from your investments. Instead, you wish you could have some kind of guarantee you will be receiving money.

 

#4 You are concerned about longevity. You are well aware that healthy people live longer today. Therefore, chances are you will still require money at the age of 85 and you do not wish to count on Government pensions to support your lifestyle and needs.

 

#5 You tend to be risk-averse toward your retiring years. As an investor, you might have been more aggressive with your asset allocation in the past but you do not wish to risk it all anymore. You are seeking for a more stable way to invest your money in order to avoid economic crashes.

 

#6 You have a high tax bracket. Since annuities are less taxed than other type of investments, high tax bracket investors tend to benefit more from this product.

 

#7 You are pessimistic. If you don’t believe the stock market will generate high returns in the future and if you are more a “bear” than a “bull”, annuities can avoid you to invest in equity. You should like the security coming with this kind of contract.

 

#8 You are a Women! Since women have a better life expectancy than men, their need for an annuity is bigger. The investment return should be better for the women than for the men.

 

You Don’t Need All 8 Points to Buy an Annuity

 

The above mentioned points are just guidelines to tell you if you are likely to benefit from an annuity or not. Technically, if you share one of those point alone, there is a high chance that a part of your nest egg should be use to purchase an annuity.

 

If you are still unsure if you should purchase an annuity, you can speak with an advisor for free now.

 

Annuities & Retirement How to Retire Without Worries

lonWill I have enough money to retire?

 

This is a question that most people are asking themselves. It gets even more crucial questions as you turn 50 and you see retirement coming forward. Governments won’t be the most generous around with their social pension plans, your employer is probably not under any guarantee to pay a fixed pension and your savings… well you simply hope to not retire before the next crisis.

 

But what if you could enter in a contract guaranteeing you that you will get paid each month? No more worries, no more uncertainty, just a sustainable income stream for your retirement. Annuities could be a great solution for your retirement plan by providing you several advantages. Here’s a list of a few reasons why annuities and retirement go well together:

 

You Can Start Investing in an Annuity Today and Retire Later

 

One of the most unknown advantages of an annuity is the fact you can buy an annuity now and start saving money inside the contract. This is called a deferred annuity plan. You are basically building up your annuity while you still earn a pay check in exchange of a pension like payment at retirement. The interest rate paid by the annuity could be fixed (linked to certificate of deposits and bonds investments) or could be variable (linked to the stock market performance). You are not only building your own secured pension plan with an annuity but you also defer taxes on potential gains realized inside the annuity.

 

An Annuity Helps You Budget at Retirement

 

A common mistake with young retirees is to start spending money like they never did. You might be sitting on $500,000 or more in your retirement account (like a 401(k) or a 403(b)), but it could melt faster than you think if you don’t budget properly. A new car and a few oversea trips later and your $500,000 nest egg could drop to $400,000 within a few years.

 

After the purchase of an annuity, you will receive a steady payment on a monthly basis. Therefore, you will have to budget your retirement needs according to your annuity payment. This is a great way to ensure you don’t fall short after a few years of crazy spending!

 

The Annuity Insure You Against the Longevity Risk

 

Do you know one of the most important risks for retirees is to outlive their savings? 50 years ago, a retiree could budget until he is 75 and would not risk to lack of money before his death. Today, it’s not rare to encounter retirees who are 85, 88 and even over 90! My two grandmothers are still living and they are 90 and 92! If they would have bought an annuity at the age of 60, they could have spent a lot more at retirement.

 

The Life insurance company pays you according to your chances of being or not being alive in the next 10, 20, 30 years. Since they insure a lot of individuals, they calculate their break even point (and their profitable point) where they pay more for a few people who live over 85 and cash the money from the annuity from those who decease earlier.

 

The Annuity is a Great Tax Management Tool

 

If you need to withdraw money from any type of pension account, you are deemed to pay an important amount of taxes to the government. Nobody wants to retire and owes money in taxes! As your income is more limited, tax planning becomes crucial.

 

The annuity payment allows the investors to spread its tax bills across his entire retirement instead of paying taxes on lump sum withdrawals. If you purchase an annuity with cash coming from your bank account, you will also benefit from a tax advantage since part of the annuity payment will be considered as a return of capital and won’t be taxable.

A Retirement Plan Should Analyze Annuities

 

If you go see your financial advisor for a retirement plan, he should definitely analyze the possibility of adding an annuity or a combination of annuities to meet your retirement needs. There are several uncertainties around retirement and annuities are part of the tools to reduce your worries at retirement.

 

If nobody told you about annuities, you should speak about it with an advisor for free now.