It really surprises me that most consumers are unfamiliar with annuities and most don’t take the time to read up on annuity news and information. I find that most consumers are well aware of Wall St. annuity news and information, bank failures; etc. but very few pay attention to the true value of the more conservative world of life insurance companies.
An annuity is the most conservative vehicle to protect your assets. An annuity in its simplest form is a CD at an insurance company instead of a bank. You are essentially buying a guaranteed rate of return in exchange for investing your money to the insurance company for a set period of time, usually no less than three to five years.
Some annuity news you read on the web suggests annuities are unsafe investments. Most if not all you read is someone else’s opinion. In fact, life insurance companies are and always have been a safe place to invest money. Life insurance companies do not go out of business like banks and stock companies have recently.
A few good reasons to consider an annuity today are:
Fractional reserve system: Banks are able to loan money on the fractional reserve system, which in a sense is like loaning out play money. Banks can lend money on the assumption that they have more money coming in, in the way of performing loans. As long as one loan is being paid on, the bank can lend out more money over and over again. So, in reality, the bank only has limited reserves compared to what is loaned out and what is actually on deposit.
FDIC only protects 3% of the nations’ wealth: The FDIC has only 1 billion dollars or so available in assets and lines of credit and the American banking system has over $4 trillion dollars. My quick math tells me we only have less than 3% of our assets protected. How safe does your money feel knowing how little protection the FDIC offers, along with the continued failure of so many banks each year?
Safety of the Life Insurance companies: On the flip side to the risk of the banking industry is our nations’ life insurance carriers. Companies like Pacific Life, ING, Prudential, and even AIG are some of the safest places in the world to protect assets from a downturn in our economy. By paying attention to these companies; what they offer, their annuity news, and up to date rates, they provide us with alternatives to traditional savings and investments. The reason the insurance industry is safer than the banking industry is the regulation of each states’ insurance department. The state insurance departments require that each life insurance company maintain sufficient reserves to cover their liabilities. That means that each life insurance policy and each and every annuity on their books must equal the amount of money the insurance company has in their reserves, dollar for dollar.
Banks vs. Insurance companies: Over 400 banks have failed since 2001 vs. less than 75 life insurance companies since 1983. My favorite anecdote is if an insurance carrier purchases a bank, they are almost guaranteed a decreased financial rating while a bank financial rating never dips when acquiring an insurance company.
Annuity advantages: By working with an independent broker like me, you can shop multiple insurance carriers to find the best rates. I can provide annuity news on each carrier to insure you are getting the best possible rates. There are no independent bankers that will shop rates for you. If you go to your local trusted banker, he or she will only offer you their rates and no comparison.
There is an alternative to putting your money at risk while still giving yourself a chance to grow your nest egg. Education is the key to success, and consumers need to read up on annuity news, information, and rates provided by the insurance carriers, agents, and regulators in each state. While banks have always seemed safe over the years, the brick and mortar in your backyard is nothing more than a ruse to attract your money. Do your research and contact a broker like me for an up to date comparison of rates.