In “How to Beat Insurers At The Annuity Game,” John Girouard of Forbes gives you his best bet for getting the most out of variable annuities. When consumers purchase a variable annuity and begin receiving payouts immediately, many times that is in the best interest of the insurance company because some of the guarantees on the growth of your principal are lost. If the consumer waits to receive those payouts they likely will be the winner, instead of the insurance companies. Many variable annuities have a guarantee that the income base will double in ten years, which equates to an annualized compound rate of return of 7%. When making a 401k annuity transfer, all you have to do is leave your money for at least ten years, and you can reap great benefits.
For the consumers that did just that before the stock market rise and fall in the past 2 years, they are receiving the benefit of this guaranteed income growth. Unfortunately for some insurance companies that had heavy investments in these types of variable annuities, they have to find a way to recover from these hard hits. The guarantee with variable annuities is that your principal will not lose value if you haven’t started receiving income payments yet, even if the market were to collapse again. You also retain some benefits from the highest that the market was during your investment time frame. There are many different types of variable annuities and the products are not right for everyone. Consumers need to understand the benefits as well as the negative aspects and weigh those with the fees. A variable annuity can be a great way to win in the financial game.
