Immediate Annuities

Posted by Ray on June 18, 2008 under Main | Be the First to Comment

While we are somewhat critical of immediate annuities and, more to the point, their restrictions we do see value for the product. When these products are used in conjunction with an asset allocated portfolio they can and do significantly reduce risk.

Immediate annuities have a reputation about them as being very inflexible and lack the ability to keep up with inflation. While that is true of older products newer products offer some flexibility. Many immediate annuities have inflation protection riders now, where the payments can increase by 3 or 5% a year, and many newer products have cash refunds to the beneficiaries so the insurance carrier will not keep all of the money when the owner passes away. These new features have increased interest in the old immediate annuity and sales have been very strong over the previous 12 months.

As the Baby Boomer generation retires we expect to see an increase in annual sales for the next few years. The problem with most of the products sold is that investors do not shop around for the most competitive immediate annuity rate. There are several websites dedicated to find the best rate for you, like Immediate Annuity Solutions, but few investors are using these valuable sites. Instead they settle for whatever their financial advisor or insurance agent recommends.

Because of this we highly recommend that you shop for an immediate annuity before just settling. After all these are a lifetime commitment so use the resources that we have available. We like ImmediateAnnuitySolutions.com, but will add more sites as we find them.