Pass-through Annuities Can Offer Competitive Returns

Many seniors purchase fixed annuities for potential safety, tax savings, and asset protection. In some cases, insurance companies will offer a higher interest rate for a limited time period to encourage those investments. But what happens after that time period ends? Other than the minimum rate guarantee, do you have any assurance that you will still get a good return?  Pass-through annuities could possibly reduce that concern by limiting the amount of money the company makes on your investment. To achieve a basic understanding about how this works, let’s look at a hypothetical example (please note that this example is for illustration purposes only and is not based upon the performance of any particular annuity product).  Say you bought a fixed annuity that had the traditional method of crediting interest. If the first year’s rate included a 5% bonus, plus the 3% minimum, you could be looking at 8%. And you might think that’s pretty good.  Then year two rolls around and it’s time for rate renewal. The annuity company might only be contractually required to the minimum interest rate, even if they earned more than that on your premium payments.  With a pass-through annuity you can potentially achieve a [...]

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