Why you don't understand what an annuity means

By bgallagher6

Calvary Cross & Associates


Recently I read a Wall Street Journal article about annuities and how they don't measure up in times of low interest rates such as we now are experiencing. Not only does the author fail to explain what specific annuity the article refers too, but paints all annuities with the same brush or color.

That is like saying all motor vehicles get bad gas mileage. Or cars may not be good for driving.

We know this is not the case, but many of WSJ readers may not realize that there are several different kinds of annuities, created to address several different goals and objectives of the individual investor.

Several different types of annuities properly placed in a portfolio offer the very best foundation a middle-aged/elderly person could hope for.

It is extremely important to know that annuities are personal contracts between the investor and the insurance company that is writing the annuity contract. The proper annuity depends upon the appropriate age, needs, goals, desired benefits and wishes of the investor.

Annuities offer guarantees. Annuities offer tax deferred growth of principal. Annuities offer death benefits, long term care benefits, nursing home benefits and most importantly, annuities offer income for life.

All these benefits come at a cost. Often these costs (on annuities) are much lower than those of a brokerage account or mutual fund. Some annuities have no fees at all. That's where poorly thought out and written articles fail the reader who depends on their accuracy.

We should be aware that the articles are slanted to those they serve (Wall Street). If you want a Ferrari, go to Italy. If you want a truck, shop Chevy and Ford, but it depends on the uses you have in mind. If you want guarantees, there's only one place to shop — insurance companies.

Your stock broker will not guarantee your retirement, and neither will your banker. Ask your insurance producer how you can protect a portion of your retirement. You'll know you're in good hands when your intuition tells you, "you can relax, you're protected."

The cost's of your annuity should be explained thoroughly by your licensed insurance producer, as they are different on every annuity, just as features, costs and gas mileage is different for every car. The question is: Which one is right for you?