Did EVEYRONE forget what Annuities Are All About?

In the race to sue insurance carriers over alleged inappropriate sales of indexed annuity products to seniors, and in the ongoing attacks by the securities industry leaders about confusing product structure and sales methods, it seems to me that this clamor has totally diverted attention from what an annuity is really supposed to be. A fixed or fixed indexed annuity is an insurance product meant to provide individuals a way to guarantee a steady source of income for retirement from an accumulated asset base. As people are delaying retirement until much later in life, insurance companies have been looking for ways to get people to commit their dollars to an annuity sooner in life, by offering distinctive deferral features in the early stages of policy ownership. Nevertheless, the primary function of any annuity is always meant to be income, not accumulation.

In recent years, insurance companies have reacted to the growing interest of annuity buyers in deferring the start of a retirement income stream, by designing annuities to include creative deferral features that can allow for the annuity to double as an accumulation vehicle until the owner decides to activate the income features, even if that deferral last for a number of years. This trend has evolved into a marketing effort that has promoted the savings and deferral features of an annuity more than the income features. To further enhance the deferral benefits, liberal annual withdrawal privileges can actually become a substitution for the guaranteed income and cause annuity owners to keep their annuity in deferral without ever annuitizing them at all.

Still, the basic guaranteed features of an annuity, which can provide an income stream that a person can never outlive, are always present, even in these newer products which offer creative interest crediting strategies during the deferral phase. So, no matter how an annuity is viewed by its critics and detractors, it is still the only way an individual can take a fixed cash asset and create a guaranteed stream of income that can last them for the rest of their life, no matter how long they live. And if they so choose, they can have that income benefit transfer, after their death, to a surviving spouse or other individuals.

If you can go back to the basics and begin to see this unique and powerful benefit that every fixed and indexed annuity can provide, you will see them in a different light in the context of current criticism. And in the case of the possible class actions suits which lie ahead for several carriers, in the function of their original intent, all of the annuities in question are perfectly suitable for even the oldest of clients who purchased one. The fact that a senior can buy an annuity and then decide when or if they want to use it to create a guaranteed stream of income, is actually providing these people a powerful financial tool. To offer them a way to earn a respectable interest return during that deferral period, with all of their money guaranteed during whatever amount of time they may choose to wait, is an incredible plus, not a negative, as some are mistakenly trying to show. And to protect their hard earned savings from market risk and interest risk by guaranteeing their principal and guaranteeing a minimum interest return, is a very positive feature that makes fixed and indexed annuities perfect for a retired individual of ANY age.