Retirement and Asset Protection
Annuities
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There are 3 basic types of annuities. Fixed, Equity Indexed, and
Variable. If you are looking at annuities for your investment portfolio,
you need to understand the difference between these types of
annuities.
First is the Fixed annuity. With a Fixed annuity, the company will
guarantee that you will receive a certain return on your premium
anywhere from 2-6%. These are very safe, but not very exciting on the
return.
Next is the Equity Indexed annuity. These also guarantee a minimum
rate of return of about 1-2%. However, they also credit your premium
based on market indexes such as the S&P 500. If the market goes, up
you can receive all the gains. If the market goes down, you receive the
minimum guarantee. It is a very safe place for your money, with a
potential for a substantial return.
Finally we have the Variable annuity. Variable annuities will put your
money in mutual funds and in the market. This type of annuity can be
attractive because the returns can be higher than on a Fixed or
Indexed annuity. However, the risk is much higher since the you can
also lose your initial premium. There are also fees associated with the
Variable annuity so even if your annuity doesn't make money that year,
you will be paying a fee for having the annuity.
Imagine you are in Las Vegas and you are going to play $1000 at a
blackjack table. There are 3 tables you can play. The first is the Fixed
annuity table. If you sit there, you will make exactly $30 for every hour
you play. At the indexed annuity table, every time you win a hand, you
get 150% back. Every time you lose a hand, you get 110%. At the
Variable annuity table, every time you win, you get 197% back. When
you lose, you lose 103%. That's because whether you win or lose, you
have to pay the house a percentage just to play.
Variable. If you are looking at annuities for your investment portfolio,
you need to understand the difference between these types of
annuities.
First is the Fixed annuity. With a Fixed annuity, the company will
guarantee that you will receive a certain return on your premium
anywhere from 2-6%. These are very safe, but not very exciting on the
return.
Next is the Equity Indexed annuity. These also guarantee a minimum
rate of return of about 1-2%. However, they also credit your premium
based on market indexes such as the S&P 500. If the market goes, up
you can receive all the gains. If the market goes down, you receive the
minimum guarantee. It is a very safe place for your money, with a
potential for a substantial return.
Finally we have the Variable annuity. Variable annuities will put your
money in mutual funds and in the market. This type of annuity can be
attractive because the returns can be higher than on a Fixed or
Indexed annuity. However, the risk is much higher since the you can
also lose your initial premium. There are also fees associated with the
Variable annuity so even if your annuity doesn't make money that year,
you will be paying a fee for having the annuity.
Imagine you are in Las Vegas and you are going to play $1000 at a
blackjack table. There are 3 tables you can play. The first is the Fixed
annuity table. If you sit there, you will make exactly $30 for every hour
you play. At the indexed annuity table, every time you win a hand, you
get 150% back. Every time you lose a hand, you get 110%. At the
Variable annuity table, every time you win, you get 197% back. When
you lose, you lose 103%. That's because whether you win or lose, you
have to pay the house a percentage just to play.