Interest Rates on Annuities
Many retirees or soon-to-be retirees are concerned about whether the money they have saved will last until they die. Some got a late start putting money into their 401(k), and others had a higher-risk portfolio that led to their losing money rather than gaining it. Many people want a steady stream of income they can count on, and annuities can provide this.
Annuity Rates Over the Last Four Years
Rates on fixed annuities have remained relatively low for the last four years. Since the Great Recession, interest rates in general have been historically low. The million dollar question is – When will rates increase? There are schools of thought on both sides of this issue, some say interest rates will begin an upward trend this year while others believe we will remain in a period of low interest rates for the foreseeable future. The fact is that no one has a crystal ball and can say with certainty either way. If you are looking for a fixed guaranteed rate annuity for a specified period of time, consider connecting with an independent professional agent that has access to many insurance carrier’s multi-year guarantee products. A local professional can help you shop the annuities available in your state and help you pick the one that best suits your needs.
Trends
Interest rates
It’s no secret that we have been in a low interest rate environment for some time now. With the uncertainty of where interest rates are heading, there has been an increasing interest in fixed indexed annuities. This trend could continue as long as interest rates remain relatively low.
Type of annuity
Recent LIMRA data shows record amounts of money is finding its way into fixed indexed annuities.1 Consumers are finding comfort in the protection from market downturns they provide in addition to a guaranteed minimum interest rate. Fixed indexed annuities also have the potential for excess interest crediting based on changes in one or more market indexes without participating in the market. Fixed indexed annuities have become especially popular because the money in them is protected from market downturns. There’s a built-in safeguard against losing any of your initial premium and interest credited in previous years due to market fluctuations. Even though an external market index or indexes can affect your contract values, the contract does not directly participate in any stock or equity investments. You are not buying shares of any stock or index fund.
Do Annuities Have a Place in Your Retirement Planning?
Everyone is different when it comes to expectations and hopes for retirement. Some are better prepared than others. If your retirement planning includes being able to turn on a monthly income stream that will last your lifetime, annuities may have a place in your plan. Using a diversified approach by including annuities with guaranteed lifetime income features can help accomplish your income goals. But know your risk tolerance. If you have a low tolerance and all your principal is at risk, you may want to consider the benefits of a fixed or fixed indexed annuity for a portion of your retirement savings since they provide the protection of a minimum interest rate guarantee.
The purchase of an annuity can give you a baseline income that you can combine with your Social Security benefits and your 401(k) earnings, as well as any other financial resources you have at your disposal. The terms of a specific annuity can vary greatly, so it is important to examine any contract closely and make sure you are choosing the product that will best suit your needs.
1http://www.limra.com/posts/pr/news_releases/limra_secure_retirement_institute___total_annuity_sales_improve_eight_percent_in_second_quarter_2014.aspx