We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,131)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (413)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (799)
  • Wink's Articles (352)
  • Wink's Inside Story (273)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • What Do People Need to Know About Annuities?

    August 18, 2015 by Sheryl J. Moore

    June marked the second annual commencement of National Annuity Awareness Month- a month dedicated to educating consumers about annuities, their benefits, and features.  Since I was out on maternity leave last June, this was my first opportunity to be involved in the festivities. In fact, I was able to obtain the Iowa governor’s Proclamation, identifying the indexed annuity capital of the world as the first state for formally recognize “Annuity Awareness Month” just a couple of months ago.

    Over the course of June’s 30 days, my annuity research firm received dozens of calls and emails with questions about annuities from prospective annuity purchasers. It was easy to see that annuities are still the black box of the insurance industry…what a shame.

    Did you know that that the #1 fear of Americans is outliving their retirement income? (Death comes-in as the second top fear.) What an awesome opportunity for our industry to educate, right?

    I know that most of my colleagues would agree that more Americans need to know about annuities. As a result of the many questions fielded by Wink, I was inspired to draft a quick 100 pertinent annuity facts. Here we go!

    1. Most people do not know what an annuities is;
    2. Those that believe that they know what an annuities is, usually do not;
    3. The greatest reason annuities are misunderstood by the public is the media’s perpetual distribution of inaccurate information about annuities;
    4. Annuities have existed since 1100 – 1700 B.C.;
    5. Annuities are a type of life insurance product;
    6. Life insurance guards against the risk of dying too soon, while annuities guard against the risk of living too long;
    7. Annuities are vehicles that are used to accumulate retirement money and ensure that you receive an income you cannot outlive, once in retirement;
    8. An annuity is the only financial instrument that can guarantee you a paycheck for the rest of your life, no matter how long you may life;
    9. Another benefit of annuities is that they accumulate earnings on a tax-deferred basis- you don’t pay taxes on the annuity funds until you withdraw them;
    10. Most annuities are funded with qualified money, meaning the money has yet to be taxed;
    11. The guarantees on an annuity are only as good as the claims-paying ability of the insurance company;
    12. An annuity purchaser should feel confident of the financials and ratings of the insurance company that they do business with, to ensure due diligence in regards to the insurer’s claims-paying ability;
    13. The most recognized firms that provide ratings of insurance companies are Standard and Poor’s and A.M. Best;
    14. One must ensure that an annuity is not only attractive and suitable, but meets their goals, objectives, and risk profile;
    15. The salesperson that sells you mutual funds most likely does not sell fixed or indexed annuities;
    16. The salesperson that sells you homeowners insurance most likely does not sell annuities either;
    17. You can purchase annuities directly from life insurance companies, in some banks, through some Broker Dealers, or through certain career insurance agents and independent insurance agents;
    18. There are two main types of annuities: deferred annuities and immediate annuities;
    19. Deferred annuities allow you to defer taking an income until you have accumulated additional earnings;
    20. Immediate annuities allow you to commence income payments within the first year of the annuity purchase;
    21. Every deferred annuity offers the purchaser the choice of annuitization;
    22. Annuitization allows an annuity purchaser to change all or a portion of the annuity contract from a cash accumulation period to a periodic distribution of funds;
    23. Most deferred annuities will allow the purchaser to annuitize the contract, without paying surrender charges, after year one;
    24. Annuitization functions similar to an immediate annuity;
    25. Most companies offer several types of income options for annuitization and immediate annuities;
    26. Although a life only income option results in the greatest payment for annuitization/immediate annuities, it also means that if the purchaser dies the day after the annuity purchase, the insurer gets to keep the annuity’s value;
    27. In addition to life only income options, there are period certain income options, which guarantee that income will be distributed for a minimum specified period (such as 10, 15, or 20 years);
    28. Many income options allow for a spouse to continue receiving income payments, should the annuity purchaser die;
    29. There are two sub-types of annuities: fixed and variable;
    30. There are also two sub-types of fixed annuities: traditional fixed and indexed;
    31. Fixed and indexed annuities are insurance products, where variable annuities are investments;
    32. There is a direct inverse relationship between possible risk and possible reward, which holds for annuities: to realize greater reward, one must generally accept a greater risk, and vice versa;
    33. Generally, financially conservative individuals are better-suited to fixed annuities;
    34. Generally, financially aggressive individuals are better-suited to variable annuities;
    35. Generally, financially moderate individuals are better-suited to indexed annuities;
    36. You cannot lose money as a result of market performance with fixed and indexed annuities;
    37. Fixed annuities earn interest at a stated rate, which is declared by the insurance company;
    38. Fixed annuities may offer an interest rate that is guaranteed for more than one year- these are referred to as ‘multi-year guaranteed’ annuities;
    39. Indexed annuities earn limited interest, based on the performance of a stock market index;
    40. The most common stock market index to be used as a benchmark of indexed interest on indexed annuities is the Standard and Poor’s 500 Index;
    41. Indexed annuities generally limit the amount of indexed interest earned via the use of a participation rate, cap rate, or spread rate;
    42. Indexed annuities do not allow the purchaser to invest directly in the index;
    43. Indexed annuities are not a ‘hybrid’ of fixed and indexed annuities;
    44. The index-linked interest on indexed annuities is provided through an instrument the insurance company purchases, called an ‘option’;
    45. Dividends on the S&P 500 (and other indices) are not included in indexed annuities’ crediting calculations because the purchaser isn’t actually invested in the index;
    46. Fixed annuities are currently averaging credited rates of 2.78%;
    47. Interest on indexed annuities is ALWAYS limited in one form or another, even if the product is “uncapped”;
    48. Indexed annuities’ caps are currently averaging 3.73%;
    49. Variable annuities allow purchasers to invest directly in stock market indices, mutual funds, and more;
    50. Variable annuities have unlimited potential for interest earnings, but also unlimited potential for losses;
    51. Fixed and indexed annuities are issued via an ‘annuity contract’ while variable annuities are offered via a ‘prospectus’;
    52. Although fixed annuities have existed for eons, variable annuities were not developed until 1952;
    53. Although variable annuities have existed for over 60 years, indexed annuities have only existed for 20 years;
    54. Indexed annuities are not intended to provide market-like performance;
    55. Indexed annuities do not compete against variable annuities;
    56. Indexed annuities most closely compete with fixed annuities;
    57. Indexed annuities are intended to outpace fixed annuity earnings by 1% – 2%;
    58. Surrender charges on deferred annuities protect the insurance company from unanticipated claims;
    59. Although deferred annuities have surrender charges, most contracts allow the purchaser to take as much as 10% of the annuity’s value out annually, without application of these charges;
    60. Most deferred annuities waive the annuity’s surrender charges in the event of either disability, nursing home confinement, and/or terminal illness;
    61. You can purchase an annuity with a single lump-sum premium, or a series of premium payments;
    62. Single premium deferred annuities only allow for a single annuity payment;
    63. Flexible premium deferred annuities allow more than one annuity payment;
    64. Fixed annuities generally guarantee at least 1.00% interest annually;
    65. Indexed annuities guarantee at least 0.00% interest annually;
    66. The fixed allocation option of indexed annuities generally guarantee at least 1.00% interest annually;
    67. Only the fixed allocation options of variable annuities guarantee interest each year;
    68. The fixed allocation option of variable annuities generally guarantee at least 1.00% interest annually;
    69. Indexed annuities feature a secondary guarantee that promises interest on a portion of the premiums paid, in the event of surrender, death, or non-performance of the index;
    70. Annuities must benefit three parties- the purchaser, the salesperson, and the manufacturer;
    71. Annuity purchasers benefit from annuities’ credited interest rates;
    72. Annuity salespeople benefit from annuities via a commission that they are paid by the manufacturer;
    73. Annuity manufacturers benefit from annuities via a spread, a.k.a. profit;
    74. It is because the guarantees on fixed annuities are relatively rich that credited rates on fixed annuities are low;
    75. The primary determinant of indexed annuity rates is the price of options that are sold to the insurance company;
    76. Bond rates and market volatility also have an impact on indexed annuity rates;
    77. Indexed annuities offer 12 different methods of calculating the indexed interest that is credited to the contract;
    78. The many different options for indexed interest crediting on indexed annuities is a result of the independent agent distribution model that the products are typically distributed through;
    79. All things being equal, an indexed annuity with averaging in the indexed interest calculation (crediting method) will offer a more attractive rate than a similar option without averaging;
    80. All things being equal, an annuity with a Market Value Adjustment (MVA) will offer more attractive rates than an annuity without one;
    81. All things being equal, an annuity with a premium bonus will have less attractive rates than an annuity without a premium bonus;
    82. Although variable annuity sales outnumber their non-variable brethren by 4:1, indexed annuity sales are equivalent to fixed annuity’s sales levels;
    83. While just a couple dozen insurance companies sell variable annuities, 56 different insurance companies offer indexed annuities;
    84. Although more companies offer indexed annuities than variable annuities, nearly 100 insurance companies sell fixed annuities;
    85. Annuities frequently offer the purchaser the opportunity to take advantage of extra features via a rider, or endorsement that offer additional benefits such as a return-of-premiums paid upon surrender;
    86. Variable annuities offer the most diverse offering of riders of any type of annuities;
    87. Guaranteed Lifetime Withdrawal Benefit (GLWB) rider guarantees annual withdrawals of the annuity’s value, at a specified level, regardless if the contract’s Account Value falls to zero;
    88. Guaranteed Minimum Accumulation Benefit (GMAB) rider guarantees that the Account Value of the annuity will grow by a minimum specified percentage over a period of time;
    89. Guaranteed Minimum Death Benefit (GMDB) rider guarantees that the annuity Death Benefit payable will be no less than a specified amount;
    90. Guaranteed Minimum Income Benefit (GMIB) rider guarantees that the annuity’s income payments will be at least a specified amount, when taken over a specified time period;
    91. An annuity owners can typically exchange one annuity for another, via a 1035 exchange, without causing a taxable event;
    92. One can purchase an annuity for an Individual Retirement Account (IRA), particularly if they are concerned about guaranteeing an income in retirement;
    93. The maturity date on an annuity is the latest point at which the purchaser MUST take income from the contract, and can no longer accumulate earnings;
    94. Annuities offer their purchasers a type of insurance, similar to that provided via the Federal Deposit Insurance Corporation’s coverage on bank products, through their state’s ‘guarantee fund association’;
    95. The insurance companies that sell insurance in any given state are responsible for funding claims though the guarantee fund association for failed insurance companies within that state;
    96. The amount of coverage provided through guarantee fund associations varies in each state, but is generally $250,000 as of the date of this article’s publication;
    97. Just because a company sells a lot of annuities does not mean that they offer the best annuities;
    98. The best-selling annuities are not necessarily the BEST annuities;
    99. Although I am a licensed insurance agent, and frequently cited as an annuity expert, I have never sold an annuity;
    100. Neither myself, nor my companies, endorse any insurance company or annuity product.

     

     

     

    Sheryl Moore is President of the Society for Annuity Facts and Education (SAFE), a non-profit organization. She is also President and CEO of Moore Market Intelligence, an indexed product resource in Des Moines, Iowa. She has over a decade of experience working with indexed products and provides competitive intelligence, market research, product development, consulting services and insight to select financial services companies. She may be reached at sjm@indexedrockstar.com.

    Categories: Sheryl's Articles
    currency