Annuity Rates Can be Different When Renewal Rates are Declared

Perhaps you are considering investing in a deferred annuity to use later in your retirement as a form of longevity insurance. You may want to look into the annuity company’s annuity rate renewal history to make your choice. Two seemingly identical deferred annuities can offer you the same terms but may produce decidedly different annuity rates at renewal time. Let’s see why. A deferred annuity comes under jurisdiction of your state’s department of insurance unlike their variable versions. This limits the annuity company’s investment options to support its deferred annuity offers for the assurance that such an insurance product will give. Regulations require most of its investments to be in bonds. Exploring your potential deferred annuity choices, you may find two companies offering an attractive deferred annuity with the same terms. Each annuity has the same initial annuity rate, the same minimum annuity rate guarantee, the same surrender charge, and lastly the same withdrawal features. But, of course, after the initial annuity rate time has expired, each company will substitute a renewal rate according to its own investment discretion. What determines that?| The earnings from an annuity company’s portfolio depends on the mix of investments (mostly bonds but also mortgages and real property) on the [...]

Read more...