Annuity Safety

Posts tagged "annuity safety"

What Type of Annuity Is Safe for You? Retirees who want to supplement their Social Security and pension income can look to their savings. They can invest those savings to generate an income or they can annuitize all or part of them. The annuity – as an insurance product – can offer a lifetime income. But are annuities safe? Well, that all depends on what you need to be safe from? Because annuities are insurance products, insurance companies can guarantee a lifetime income. Their vast number of annuity contracts allows mortality statistics to govern predictable payout obligations as a whole. So, these insurance companies need only keep their funding, investments, and finances in good order for the duration of their payout obligation to you for your safety. AM Best and others monitor each company’s ‘financial health’. But companies can potentially fail their obligations – although this possibility is generally low. If you start with annuities that have a safety rating of A+ form AM best and AA from S&P, your annuity safety will be high. Retirees either want to begin annuitization (getting monthly payouts) right away or delaying it until there much older. The latter option is a form of [...]

How Safe are Fixed Annuities?

Safety is a relative term because what is safe to one person is risky to another. For instance you may consider a U.S. Treasury bond one of the safest investments since it is backed by our government. But a true skeptic might say, “Suppose the U.S. government went belly-up? The bond could then be worthless.” Or he might argue that the government’s unabated printing of money will debase our currency making dollar investments worthless. Yes, he could have a valid point. However, putting the extremes aside, safety is one of the top reasons that people buy fixed annuities. There are several independent rating agencies that regularly assess the financial strength of insurance and annuity companies. Included are A.M. Best, Duff & Phelps, Moody’s, Standard & Poor’s, and Weiss Research. These firms will give you an evaluation of a company’s balance sheet strength, operating performance, and ability to meet ongoing obligations. In addition, all companies must follow the “legal reserve system.” This is a set of rules on asset management, accounting, and reserve requirements. The reserve requirements assure that funds are set aside specifically to protect against an insurance company’s portfolio losses. Furthermore, insurance companies are state regulated. And all 50 [...]