Annuities can provide a steady flow of retirement income. But there are many types of annuities and not all of them are right for everyone. Insurance companies and agents are sometimes over aggressive in trying to convince a consumer to buy a particular annuity. Just because an annuity comes with a recommendation doesn’t always mean that it is the right one for a person’s unique portfolio. It is always better to do the research to find the right one for your own situation.

Benefits and limitations of different annuities

By knowing the benefits and limitations of each type of annuity, you can find the right one for your needs. The immediate annuity is a good starting point. With an immediate annuity, the customer gives the insurance company a lump sum cash payment in exchange for a guaranteed monthly income payment that continues until the end of the client’s life. With this type of annuity, the customer cannot outlive the money. The problem with this type of annuity in today’s low long term interest rate climate is that the monthly income payments are not sufficient to justify the original large outlay of principal to buy the annuity.

Consumers shopping for an immediate annuity may also be comparative shopping for a fixed annuity. Many investors who are looking for a hedge against losses in the stock and bond markets look to the immediate annuity which offers a guaranteed return of principal. Conservative investors who normally keep their money in Money Market funds and CDs prefer the higher rates which insurance companies offer on fixed annuities. But because the owner of the annuity can only withdraw 10 percent of the principal a year, this would not be the right annuity for a consumer who needs to be able to withdraw larger amounts. This problem can sometimes be overcome by selecting a shorter annuitization period, thereby increasing the monthly payments.

For consumers who want to maximize growth rates and take advantage of tax deferral, the best option may be variable annuities. Variable annuities can offer the potential of a professionally managed capitol appreciation combined with tax-deferred earnings growth. When the stock market is in a high growth period like the last decade, the variable annuity has been widely sold because of its unlimited growth potential. Additionally since the capitol gains and dividends are deferred until withdrawal, the returns can be much greater. The biggest drawback to the variable annuity is this type of annuity is not guaranteed. Thus, in a major stock market decline the annuity can suffer a significant loss in value.

An investigation of annuities should also include the index annuity. The index annuity is one of the newer annuities to be offered to consumers. The appeal of this type of annuity is the growth potential in periods of rises in long-term interest rates. Index annuities owners benefit from increases in the stock market at rates that are higher than fixed rates. There are stop loss features which protect the principal from big market swings. The annuity is also guaranteed as long as the owner does not cash out the contract before the end of the surrender period.

The Use of Annuities for Retirement

With more people retiring and living into their 80s and 90s, it is important to have a plan that provides both income and growth. Annuities can be valuable additions to consumers financial portfolio. Finding out the different types of annuities and understanding their benefits and limitations can help in selecting the right product for your own financial situation. Whether you are looking for a guaranteed income from an immediate annuity or if you just want a higher return on your savings from an index annuity, annuities offer solutions to help meet your needs. For more articles like this, bookmark www.BrokerAnnuities.com

The recent stock market has been scary at worse, challenging and complex at best.  For many of us planning and saving for our retirement, it is daunting.  For those that are already in their retirement, it can certainly make for huge changes in lifestyle and other factors if retirees have to figure on less retirement income off of which to live.   Some news outlets have even put the spotlight on retirees who lost "it all" or at best, way too much, in the recent stock market declines and other recent financial scandals.

Thus, the advice to control what you can is apt.  Contact an annuities broker or life insurance profesional to better understand how annuities can fit into your overall retirement planning and future retirement income forecasts. 

Over the last few months I have been flooded with phone calls and emails from clients asking me what to do in this turbulent market. Many had stopped contributing to their retirement and investment accounts and were planning to cash out their investments completely. After talking them off the window ledge, I reminded them of a few key rules to investing:
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With the current market, investors are looking for ways different vehicles to plan and invest in their retirement.  Annuities can be an attractive way to recover from your recent stock market losses and regear your retirement portfolio.  Discuss your annuity questions with an annuity broker or life insurance professional.  

Stretch Your Nest Egg: ‘Guaranteed’ Income , originally published on SmartMoney.com.

Editor’s Note: Retirement-planning in normal times is like home maintenance—with a little bit of effort and expense, applied regularly over time, you keep your structure sound. But planning right now is like figuring out what to do after a tornado blows your kitchen and garage into the next county. Despite the market’s recent rally, many people’s nest egg portfolios remain mangled beyond recognition. In this special report, SmartMoney features advice that can help investors roll up their sleeves and rebuild.

Someone who owns a variable annuity might be tempted right now to say, "I told you so." These annuities, a hybrid of an insurance contract and a mutual fund, have attracted an impressive $750 billion in new money over the past five years. Their sales hook: features that give customers a combination of a steady income and a chance to increase that income if the investments do well. Unlike their neighbors, variable-annuity investors haven’t had to worry about their income dropping.

Still, the universe for these products is changing in alarming ways. Allan McDonald, a 71-year-old retiree in Ogden, Utah, got a nice income from an annuity he purchased in 2001. But when the former rocket scientist went to purchase a new one last fall, he found that the fees—already quite high compared with those of mutual funds and other kinds of annuities—were 30 to 50 percent higher. And when McDonald settled on an ING policy, the company stopped offering it before he could invest. McDonald ultimately found an annuity he liked, but he’s still getting used to worrying about the industry’s financial soundness. Then again, he says, "I never would’ve imagined Lehman Brothers and Bear Stearns wouldn’t have made it."

The market’s losses help explain the surprising hikes in fees. To guarantee their benefits to investors, insurance companies use complex hedging strategies; now many investors’ accounts are underwater, and the cost of those strategies has gone up. In some cases, fees have risen dramatically—both for new policyholders and existing ones who want to lock in those payment increases. This winter AXA Equitable raised the fees for one of its annuities 23 percent, while some of PacificLife’s fees jumped 59 percent. (AXA says its price is "very reasonable," given the income guarantees. PacificLife declined to comment.) Even before the latest blip, fees often topped 3 percent, meaning a policyholder with a $1 million annuity was paying more than $30,000 a year. Those fees come out of investors’ account balances, making it less likely that their payments will ever grow. And many insurers have seen their financial soundness drop with the credit crisis.

So how does an annuity investor sleep soundly? Thom Hall, the Salt Lake City certified financial planner who helped McDonald, says insurers that survived the recent crash without needing a bailout or slashing services dramatically are probably in a strong position today. (Hall says John Hancock and Prudential are on solid ground.) No U.S. company has ever defaulted on an annuity payment. But investors who want pension-like paychecks without the high fees and potential drama might do better with a simple fixed annuity. And customers who are already in a variable annuity should be cautious about bailing out: You’d be selling the underlying investments at a loss, and most products carry "surrender charges" of as much as 10 percent of assets for those who opt out early.

The following is a very detailed and helpful article regarding annuities.  If you have more questions about annuities and how they can be a key part of your retirement portfolio, contact an annuities broker or life insurance professional for more information. 

Getting Smart About Annuities, originally published on The Wall Street Journal Online.

These products can be loaded with traps and fees. But there are valuable ways to use them to build a pension — and salvage your nest egg.  Written by Anne Tergesen and Leslie Scism.

For years, many retirees were content to act as their own pension managers, a complex task that involves making a nest egg last a lifetime. Now, reeling from the stock-market meltdown, many are calling it quits — and buying annuities to do the job for them.

In recent months, sales of plain-vanilla immediate annuities — essentially insurance contracts that convert a lump-sum payment into lifelong payouts — have hit an all-time high.

That’s a big change from a few years ago. Then, the hot products were variable annuities whose value fluctuates with an underlying investment portfolio. Many purchase these products with riders that protect against stock-market losses and guarantee a minimum paycheck for life.

Annuities in general have never been popular with many financial advisers. For the most part, the products don’t offer the potential for outsized gains. And once you hand over your money to an insurer, you either can’t get it back or can do so only by forfeiting at least some of the guarantee you’ve paid for. Variable annuities, in particular, can be ridiculously complex and loaded with fees and hidden traps.

But for those grappling with investment losses, annuities today have an undeniable appeal. At first glance, they offer a way to restore some financial security to what are supposed to be your golden years. There is even evidence that retirees with regular paychecks are happier than those who rely exclusively on 401(k)s to supplement their Social Security. The latter "are more prone to depression due to concern about running out of money," says Stan Panis, a director in Sherman Oaks, Calif., for Advanced Analytical Consulting Group of Wayland, Mass., and author of a study about annuities and retirement satisfaction.

The problem: While many investors have a general idea of what an annuity is, few understand the strategies available for making these products a part of their holdings. You have to figure out how much to buy, whether to put your money to work immediately or gradually, and how to invest what remains.

Here are some of the best ways to do that.

Immediate Gratification

The immediate annuity is relatively straightforward: It allows you to convert a payment into monthly, quarterly or annual income for life. Most immediate annuities are fixed, which simply means they pay an amount that’s established at the outset.

Typically, immediate annuities provide a significantly higher level of sustainable income than you’d be able to produce from your investment portfolio, assuming you stick to the convention of withdrawing no more than 4% of your nest egg per year. For example, a 65-year-old man who buys an immediate annuity today will receive some 8.4% a year of the amount he invested in the annuity.

The extra income is the result of the requirement that you surrender your principal to the insurer. Each payment consists not just of interest, but also of a portion of your principal, prorated over your remaining life expectancy. The payments are guaranteed to continue for the rest of your life. But when you die, they stop — regardless of whether you’ve recouped the amount you paid for the annuity.

If you are willing to settle for a lower income, you can buy features designed to overcome some of the drawbacks of a traditional annuity. With one, for instance, your heirs will receive a set number of years of income if you don’t live to collect it. (First, though, check whether buying a life-insurance policy would be cheaper.) Another raises payments by 2% or more annually to keep up with inflation — a key feature, given the way inflation can erode purchasing power.

How much should you put into an annuity? If Social Security plus any pension you receive won’t cover your monthly budget, many economists recommend buying an annuity for an amount that bridges the gap.

But if you’re worried about leaving something for your heirs, Jim Otar, a financial planner in Thornhill, Ontario, recommends this approach: Annuitize just enough to meet your income needs — in conjunction with the 4% annual withdrawals from your investment portfolio that most investment advisers consider prudent.

Consider a 65-year-old man with $1 million of investments who anticipates spending $60,000 a year, in addition to Social Security. That amounts to 6% of his $1 million — a level that exceeds the recommended 4% withdrawal level. To not risk depleting that nest egg, the man would have to pare spending to $40,000 a year, indexed to inflation. Alternatively, he could put about $720,000 into an immediate annuity that would produce some $60,000 a year for life.

Another option from Mr. Otar: Put $450,000 into an annuity, which would give the man a payout of nearly $38,000 a year for life. To produce the other $22,000 needed to cover his annual expenses, he could withdraw the recommended 4% from the $550,000 that remains of his initial $1 million.

Of course, if the $550,000 nest egg declines in value, the man’s income will fall, too. If so, he may have to tighten his belt or purchase an additional annuity, Mr. Otar says. But if he dies tomorrow, such an arrangement ensures his heirs will receive much more — $550,000 versus the $280,000 he would have with an annuity that produces the entire $60,000 in income.

Longevity Rider

Another way to preserve more for yourself or your heirs is to buy a deferred-income annuity with a longevity feature. Like a conventional immediate annuity, this one produces an income for life. But the payments typically don’t kick in until the policyholder turns 80 or 85. For $71,300, a 65-year-old man can get a $60,000-a-year payout starting at age 85; that compares with $714,430 for an immediate annuity, according to insurer MetLife Inc., whose product is called longevity income guarantee.

Knowing that this safety net will be in place, you may be able to withdraw a greater percentage of your savings earlier in retirement than would otherwise be prudent — some 5% to 6% a year, compared with the typical 4%, says Jason Scott, managing director of the Retiree Research Center at Financial Engines, a Palo Alto, Calif., firm that manages 401(k) accounts. Payments may be timed to kick in when you may need help with rising medical or long-term-care costs.

When should you buy an annuity with a longevity rider? "When you retire," says Mr. Scott. The longer you wait, the more you’ll pay for a given level of benefits, simply because your chances of surviving to receive payouts improve as you age.

In contrast, with a conventional immediate annuity, economists are divided over whether it’s best to buy at retirement, or after age 70. That’s when an unpleasant reality sets in: Your peers start dying in big enough numbers that the financial benefits of joining them in an annuity pool start to outweigh the costs.

Wading In

One way to hedge your bets is to "ladder" your purchases — by buying immediate annuities in bits and pieces over time.

Proponents say that by doing so you’ll reduce the odds of buying at an inopportune time. For instance, when interest rates are low — as is the case today — insurers offer skimpier payouts because they stand to earn less on the corporate and government bonds that back their payments.

Another reason to stagger your purchases: It gives you some flexibility to adjust your annuity purchases if your circumstances change, says Benjamin Goodman, director of actuarial consulting services at TIAA-CREF, a New York-based provider of low-cost annuities.

How should you construct your ladder? Mr. Otar uses this rule of thumb: First, decide how many years to spread the purchases over. Those who feel they can afford to take some risk may want to spread purchases over as many as four years, he says.

Then, he says, "the amount of premium you pay in the first year should be twice as much as in the second year, and so on." Someone who wants to annuitize $300,000 over three years should commit roughly $170,000 in year one, $85,000 in year two, and $45,000 in year three. By advising clients to buy more upfront, Mr. Otar seeks to reduce the amount of money that an individual would have at risk in the event of a bear market. (Sample Mr. Otar’s calculator, which costs $99.99, free of charge at www.retirementoptimizer.com.)

Of course, these days, trusting your future to an insurer — even a top-rated one — requires a leap of faith. But in the event of an insurer’s insolvency, industry-funded associations provide at least $100,000 in coverage for the guaranteed portions of annuity contracts held at an insolvent company. Check the site of the National Organization of Life and Health Insurance Guaranty Associations (www.nolhga.com) for links to your state association’s Web site, where, generally in the FAQs section, you can find the coverage limit.

So as not to exceed this limit, divide your purchases among highly rated carriers, says David Babbel, a professor of insurance and finance at the University of Pennsylvania’s Wharton School.

Upside Potential

While an immediate annuity will generate regular paychecks at once, it does nothing to help rebuild a depleted nest egg. That’s where variable annuities with "living benefits" come in.

A variable annuity, in its simplest form, combines tax-deferred savings and, potentially, investment gains — typically in mutual funds — with insurance. So when you die, and even if the investments perform poorly, your heirs get a payout. Variable annuities with living benefits have investment-performance guarantees that kick in while the annuity owner is alive — even if the investments tank.

The most popular form of a living-benefit rider sold in recent years provides a monthly income check from the date you elect benefits to start until you die, with benefits depending on your age at the start date. Some contracts also allow you to buy additional riders that let the income stream continue to a spouse.

These products give you the chance to benefit, after fees, from any market increases, and the insurer protects you on the downside. At a minimum, you get back your initial investment, spread out in monthly checks beginning at some point after you turn 59½, an age set by law. This is called the guaranteed-minimum-benefit base.

Under many living-benefit contracts, the buyer has two, and sometimes three, account balances to monitor. The first tracks the actual value of the stock-fund and bond-fund holdings. The others are different formulations of the guaranteed-minimum-benefit base. When you are ready to tap your income payments, the highest balance is used to calculate the payments.

Many contracts ratchet up the guaranteed base annually to incorporate investment gains in the underlying mutual funds, and many versions sold in recent years promise 5% to 7% compounded annual growth of the initial investment.

The bad news: The best deals are rapidly being pulled from the market. Insurers are trying to bring the guarantees in line with higher hedging costs and to meet stiff capital regulatory requirements showing they can make good on their promises.

So how are variable annuities best used, and who should buy them? In general, these are products for relatively well-off baby boomers, people whose investments total $500,000 to several million dollars. The most logical candidates are people in their 50s who don’t need to convert investments into an income stream for at least five or 10 years. Those who need an income stream right away generally are better off buying immediate annuities.

A variable annuity with a guaranteed minimum benefit "gives you the fortitude to be in the market" if your inclination is to hunker down in safe but low-yielding investments as you enter the final stretch toward retirement, says Jerome Golden, president of Massachusetts Mutual Life Insurance Co.’s Income Management Strategies division.

Unlike immediate annuities, guaranteed-minimum variable annuities generally give buyers access to their principal should their plans change. But many contracts contain restrictions that make it costly to do so. Also, if the underlying investments perform badly and the payouts end up based on the higher guaranteed-minimum-benefit base, you must take the money in a stream of payments over years. There’s no lump-sum payout of the guaranteed benefit base.

If you want all your money back, you will have to cash out the smaller sum that remains in your stock and bond funds, not the higher guaranteed amount.

Another caveat: If you withdraw more than the designated maximum annual amount, you could damage your minimum-payment guarantee. In such cases, the insurer has the right to reduce the amount it is obligated to pay out over your lifetime. The formulas for reduction vary from insurer to insurer.

What’s Selling

For all their shortcomings, these guaranteed-minimum variable annuities appeal to many as a source of retirement income. The top seller is a type with a "guaranteed lifetime withdrawal benefit," under which owners can annually withdraw a specified maximum percentage of their fund account or guaranteed-benefit base, whichever is higher. Contracts sold in recent years generally allow 5%-a-year withdrawals for 60-year-olds, and 6% withdrawals for those in their 70s.

But in what has become a trend, Pacific Life Insurance Co., a top-10 variable-annuity seller, as of Jan. 1 reduced the withdrawal rate to 4%, from 5%, for new customers in their 60s in one of its popular offerings. Numerous other insurers have followed suit in making these reductions, and industry executives and consultants expect more announcements in coming weeks.

The other main type is a "guaranteed minimum income benefit" variable annuity. It generally requires you to annuitize to tap into the guaranteed-benefit base — although thanks to the competitive frenzy, some contracts offer both withdrawal and annuitization features.

A word of warning: On the annuitization contracts, variable-annuity issuers often use life-expectancy estimates that are favorable to them in determining the level of annual payments. The result: Annual payments that could be significantly smaller than if you had the ability to shop around for the best deal.

Either way, annual fees typically total more than 3.5% of the account balance, and price increases now being pushed through by many companies are bringing costs to about 4%. The fees come out of the owner’s fund account, which means they cut into the investment return.

All in all, the complexities of the contracts generally mean they need to be bought through financial advisers.

The Right Blend

In addition to protecting a portion of your nest egg, annuities can — at least in theory — help you rebuild the rest. The logic, says Moshe Milevsky, an associate professor of finance at the Schulich School of Business at York University in Toronto, is that with some income guaranteed, you may feel comfortable investing more of your portfolio in stocks. The big decision those in or near retirement face, he says, is "how much to allocate to regular stocks, bonds and mutual funds, versus" annuities with income guarantees.

To solve this puzzle, first figure out how much of your portfolio you’ll need to annuitize. The percentage will depend on how much income you need as well as whether you use variable or immediate annuities.

For example, a 65-year-old man with a $1 million nest egg can generate $50,000 a year by putting about $600,000 into an immediate fixed annuity. Alternatively, he can get the same $50,000 with a variable annuity that allows for a 5%-a-year withdrawal — but only if he puts the entire $1 million into the contract.

He also can use a combination of the two. For example, he might put $400,000 into an immediate annuity that produces $33,500 a year and $325,000 into a variable contract that plugs the $16,000 or so gap — assuming it has a 5%-a-year withdrawal feature.

To figure out how to invest the $275,000 that remains of his $1 million, this individual would first have to figure out which bucket — conservative or risky — his annuities belong in.

With immediate fixed annuities, it’s straightforward: "These are substitutes for bonds," says Tom Idzorek, chief investment officer at Ibbotson Associates, which designs portfolios of stocks, bonds and annuities. So, if the man above with the $1 million portfolio were to put $400,000 into immediate fixed annuities, he would effectively hold 40% in bonds.

Variable contracts with income guarantees, on the other hand, can be treated as either stocks or bonds — and their classification may change over time. Such an annuity should be viewed as a bond substitute when the money invested substantially declines in value. That’s because the insurer guarantees that, at the very least, you’ll receive a bond-like 5% annual return on your initial deposit for the rest your life, says Prof. Milevsky. If, however, the investment fares well, you should treat it as part bond and part stock.

How much should be assigned to each? First, look at the way the money in the variable account is invested. Ideally, those who buy these products should pick the riskiest blend allowed — say, 70% in stocks and 30% in bonds. (As insurers try to reduce their exposure to risk, many are requiring annuity buyers to put at least 30% into bond funds.)

But due to the guarantee, the variable annuity’s actual risk profile is more conservative than it appears. Assuming an investment horizon of 20 or more years, a 70/30 investment mix would behave more like a 50/50 combination, says Mr. Idzorek.

As a result, a 65-year-old man who puts $325,000 into a variable-annuity contract for all practical purposes has 50% of the value, or $162,500, in stocks and 50% in bonds.

As a percentage of his $1 million portfolio, this translates into 16% in stocks and 16% in bonds. Combined with the $400,000, or 40%, he invested in immediate fixed annuities — in the example above — the man would have a total of 56% in bonds and 16% in stocks. If his goal is to achieve an overall portfolio mix of 40% in stocks and 60% in bonds, he ought to put the vast majority of the $275,000 that remains in his portfolio into stocks, says Mr. Idzorek.

Annuities can be a key element to your retirement portfolio, and this is a primer of sorts on annuities.  Contact an annuities broker and/or life insurance professional for more information on how to incorporate annuities into your retirement portfolio and which annuities are right for your retirement needs.

Do you want to make investments for your old age? Are you feeling confused? Are you looking for better investments plans for future? Is your retirement worrying you? Stop worrying and consider the following tips on how to start your investments:
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Broker Annuities presents the following information on Social Security.  Depending upon your age, you may not ever see Social Security in the way that retired generations before us have.  With that being the potential, you need to make sure that you have a well-rounded retirement portfolio that factors out the potential of social security and provides you with a retirement income.

You are required to get a Social Security number before you work your first job. Parents will need a number for kids to claim a deduction on their taxes. Officially, if you are 18 and earn money, you have to get a number because the employer has to use it to report their income. You can’t opt out of the Social Security system. Social Security is the name given to a host of programs. Technically, it is old age, disability, survivor’s insurance, supplemental security income for the disabled or the elderly. Employees and employers are required to pay Social Security taxes. Most of the money collected goes to pay current recipients.
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I recently read this fascinating article that certainly helped me to reevaluate how I am looking at my longevity and investment options well beyond 75, even forecasted out to 95!  An annuities broker or life insurance professional can help you understand how to best address your insurance and annuity needs for your retirement portfolio. 

With life expectancies on the rise, millions of people are now facing the challenge of how to support themselves into their 80s, 90s, and even beyond. Longevity insurance is one possible solution. That’s the descriptive name for a specialized annuity designed to begin making lifetime income payments to recipients at a trigger date of their choosing.

Age 85 appears to be the most common start date for these annuities, but the date can be tailored by the recipient at the time of purchase. Usually, the type of annuity used for this protection is called a single-premium deferred annuity (SPDA), meaning the annuity is purchased with a single payment, and the date payments begin is deferred to a future time. "It’s a very interesting alternative to a traditional annuity," says Anna M. Rappaport, a consulting actuary and chair of the Society of Actuaries’ Committee on Post-Retirement Needs and Risks. She notes that devoting a portion of your existing nest egg to such a product will reduce your investment portfolio, and thus your income during the earlier years of your retirement. But this may be more than offset by the income you can earn in your post-85 years. Plus, you’ll be certain that you can spend down your portfolio by the time you turn 85 and not worry about outliving your income.

The earlier you buy such an annuity, the less it will cost. That’s because the insurance company issuing the annuity will have your money for a long time before it must begin making payments, and it will be earning a return on your premium from day one. Also, the insurance company will generally keep your premium even if you die before the trigger date, and the odds of when you will die are factored into the premium.

MetLife has been selling this sort of product for several years. For a $50,000 purchase, the company says, lifetime annual payments for a male beginning at age 85 would be $75,036 a year if the product was purchased at age 55. If purchased at 60, the payments would be $56,106, and at 65, the amount would be $41,298. For women, the comparable income amounts are $59,220 (age 55), $44,580 (age 60), and $33,102 (age 65). The lower payments to women reflect their greater chances of surviving to 85 and beyond.

How long will you live? On average, a 65 year-old man will live more than 17 years; a 65 year-old woman will live another 20 years. But these are averages, meaning the odds of living longer are considerable, and they’re rising. For someone reaching the age of 85, living another five to 10 years is normal. Family history, lifestyle, and your health profile are good indicators of whether you should even worry about being around by the age of 85. Online longevity calculators can help you make this assessment.

What’s your current retirement spend-down plan? Rappaport notes that many people don’t even have a plan, and that building one should be an essential part of any longer-term look at your financial needs. Research by the Society shows, for example, that the value of a retiree’s home is a large part of their assets and should be included in their long-term thinking. A reverse mortgage might be an attractive alternative to longevity insurance, she notes, because it allows people to use their home equity as an annuity and live in their house as long as they can without making further mortgage payments. At the same time, using part of the proceeds from a reverse mortgage to buy longevity insurance could fund a move into assisted living or another type of retirement community at a later date.

Tax considerations. Annuity income is generally taxable, so using a Roth IRA as the holding vehicle for longevity insurance is an attractive solution. Contributions to Roth IRAs are taxable but withdrawals aren’t taxed. Furthermore, there are forms of longevity insurance that include payments to beneficiaries should you die before the trigger date. These products do not provide such attractive post-85 income payments as pure longevity insurance. But they do allow you to hedge your bets, and holding the insurance inside a Roth may permit attractive estate-tax treatment.

What are your estate wishes? Longevity insurance can also be an attractive estate-preservation tool, Rappaport says. Given the likelihood of heavy medical expenses in the later years of life, longevity insurance can provide a substantial income stream for such expenses and thus preserve your estate. You should get legal and financial advice for the estate and tax issues raised by longevity insurance decisions.

Understand your financial risks. Longevity insurance payments won’t kick in for 20 or more years for most purchasers. So, as with life insurance, the financial health of the insurer is a major consideration when buying longevity coverage. Insurance companies may eventually be covered by the same types of federal account insurance as banks, but that’s not true today. Industry and state programs do exist to protect policyholders, but they are not backed by the federal government. Many annuity insurers have been rocked by steep losses in 2008 and 2009, so make sure you buy products only from those companies with solid financial ratings. A.M. Best, Fitch, Moody’s, and Standard & Poor’s are the leading ratings firms for insurers.

Take your time. This is an important decision that will have a big impact on the rest of your life. Rappaport notes that everyone’s been through a big financial shock in the past 18 months, and she advises against making any radical changes now. "I might be inclined to think about this as a really good long-term strategy," she says of longevity insurance. "But I’d give it another six to 12 months [before acting] to see how the market emerges and how the crisis has unfolded."

Broker Annuities and some thoughts about how to invest when you are 50+.  With a volatile market, and decreasing home values, many people nearing retirement are finding themselves contemplating how they are going to achieve their previous retirement goals, or if they are going to have to continue to work longer and harder for retirement.  Discover how annuities may help you with your retirement goals.

If you have built up substantial assets in cash, property or retirement funds, investing after 50 is probably not the right time to take financial risks…..or is it? As one long time Investor put it to me, the first rule of investing is "Don’t lose money". That is a very simplistic view of putting your money to work for you, but it should always be in the back of your mind as you approach retirement.
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Broker Annuities presents the following article from The Wall Street Journal, written by Tom Lauricella regarding Immediate Annuities.  Immediate Annuities can be a vital part of a retirement planning strategy, a guaranteed income if you will.   Discuss Immediate Annuities with your financial planning professional or a life insurance professional for more information. 

Tough times in the markets are renewing interest in an old, reliable investment for retirement: immediate annuities.

These insurance products convert your cash into a stream of income that can be guaranteed to last the rest of your life. With many retirees staring at double-digit losses on their portfolios, that kind of reassurance is attractive.

Unlike some annuities that are complicated and expensive, immediate annuities are usually fairly straightforward. However, comparison shopping among insurers is essential because their payouts vary.

An immediate annuity can function just like a pension, producing a predictable payout. As the "immediate" part of the name suggests, the distributions start shortly after the money is invested. The trade-off with an annuity is that in exchange for that guaranteed payout, an investor gives up control of the money.

Payouts largely depend on an investor’s age — the older the investor, the bigger the checks — and on the level of interest rates. These annuities are worth considering for retirees who tap their portfolios to pay day-to-day expenses and stand a chance of using up their savings.

‘Shifting the Risk’

"You’re shifting the risk that you’ll outlive your money over to the insurance company," says Scott Stolz of Raymond James Financial.

If you’re relying on your portfolio for living expenses, financial planners typically suggest withdrawing no more than 4% a year, to limit the risk of outliving your funds; in contrast, with an annuity, you’ll get a bigger starting payout.

For example, an immediate annuity offered by Vanguard Group would convert a $100,000 investment from a 65-year old couple in Pennsylvania into $604.69 a month for life. (This policy comes with 100% joint survivorship, which means that when one spouse dies, the survivor continues to receive the full payout. It’s possible to get higher payouts for a lower survivor percentage.)

How much to annuitize?

One strategy is to get a big enough check to cover essential expenses. Mr. Stolz suggests waiting a year or so into retirement to be sure of how much money is needed on a continuing basis.

One problem with getting a fixed payout from an immediate annuity is that over the two or three decades that a retiree may live, inflation can eat into the value of that money. It takes more than $1,700 to buy today what it cost $1,000 to buy in 1989.

Inflation Protection

You can insure against that erosion of spending power by using an annuity that adjusts to inflation. This feature comes with a cost, however. The same Vanguard annuity with an inflation-adjustment rider pays out $151 less per month initially, $453.49.

That may sound like a big difference, but inflation could more than reverse that gap over the course of retirement. If the consumer-price index rises 3% a year, the monthly payout on that inflation-adjusted annuity would hit $609 in 10 years — matching the quote on the non-inflation-adjusted annuity — and reach $818 in 20 years.

Paula Hogan, a financial adviser in Milwaukee, notes that the current environment, in which the inflation rate is declining, raises an additional issue: Some inflation-adjusted annuities, such as Vanguard’s, can lower payments if consumer prices fall and then increase them again if prices subsequently rise.

Add Annuities Over Time

As an alternative way to contend with the inflation challenge, Ms. Hogan recommends some clients annuitize portions of their portfolio over time. That allows them to increase their income stream as needed, as well as to diversify among different insurers.

How much do payouts vary among insurers? A recent sampling of eight major insurers done for Encore by Hueler Cos. — a firm that has an online annuity quote service for advisers — found a difference of $108 between the highest and lowest payouts on a $100,000 annuity for a 65-year-old couple.

"I can ask 10 companies for the same exact type of annuity and get 10 different quotes," says Kelli Hueler, chief executive of the firm.

Broker Annuities presents the following thoughts on Equity Index Annuities.  If you have more questions about EIAs, you can consult our pages and tabs on our site for a break down of each annuity.  For more info and to see how EIAs can fit into your portfolio, consult a life insurance professional. 

‘Save for a rainy day’ is a wise old saying and there are many ways you can prepare for the sunset of your life. Investing in an annuity is one way. An annuity is a long-term, interest-paying contract offered through an insurance company or financial institution. An equity indexed annuity is an annuity that earns interest that is linked to a stock or other equity index. Depending on how those stocks fare will determine what you gain. The equity index annuities, as in any kind of investments, have to be kept untouched for a long period. The typical time is a minimum of 7 years. This will ensure that you get the full benefit of having invested in an equity index annuity.

The equity index annuities are basically an option of investment that is offered by insurance companies. They actually provide you with the benefit of investing in the stock market without the associated risks of losing your money. So, in an equity index annuity, your principal is never lost and even in a worst case you may take some interest back home. The flip side of this however is that even if the stocks that the equity index annuity is invested in gives high returns, you will not receive the full returns but just a percentage. So you do not get the maximum returns for your equity index annuity but just a part.

This is however the compensation that the insurance companies who offer you the equity index annuities receive, for providing you with a safety net throughout the term of the annuity. The percentage of returns (i.e. the gain of the index) that your equity index annuity brings you is determined by the participation rate. This rate is pre-decided and varies and to know this you have to read the fine print prior to signing on the documents. The general participation rate offered for most equity index annuities is between 70 to 90 percent.

The equity index annuities are therefore seen as a conservative and prudent investment.

They became quite popular during the previous bullish run in the market and insurance companies saw them as an excellent means of combining the security of a guaranteed return with the boom of the stock market. All equity index annuities offer a minimum interest rate and its value also does not fall below the guaranteed minimum percentage of the premium paid i.e. 90 percent at least.

However to achieve maximum benefits, your equity index annuities should not be withdrawn before the term. If you do even a partial withdrawal it will definitely affect the interest you receive. Like all investments, this is best kept for a long term. This will also help your equity index annuities even out and recover if the index plunges. As we know the stock market is volatile and this needs to be kept in mind when investing. Also there are definite withdrawal penalties that you would have to pay as well.

How then do the insurance agencies benefit from offering equity index annuities? The insurance companies reinvest the premium amounts that you pay and this is usually invested into bonds. Since the participation rate is fixed, they have to pay only those set rates of interest to the investors of the equity index annuities and the insurance companies profit the balance.

Equity index annuities are generally affiliated to a particular stock market index such as the S&P 500 or the Dow Jones Industrial Average. However as the equity index annuities combine features of a typical insurance product with the traditional security they do completely fall into each of those specific categories.

As a typical insurance product you are guaranteed minimum return and in terms of securities your investment is linked to the equity market. However it all depends on the features that your equity index annuity provides and it may or may not be a security. The typical equity-indexed annuity is not registered with the SEC.

So then how does one know which equity index annuity is best for oneself? The only way is to find out as much as you can about the equity index annuity before you decide.

Ask a lot of questions like which stock market index does the equity index annuity use? What participation rate is being offered to you? Are there any hidden charges in terms of any fees or deductions payable? You have to run through a number of equity index annuity offerings before making your decision.

So save for a rainy day and do it the equity index annuity way!