Who Should Buy Annuities?
Conservative investors should buy an annuity that is a fixed annuity as the principal
is guaranteed and the interest rate is stated in advance. Buying an annuity
of the fixed variety is typically done by people age 55+ seeking security
for retirement. These retirement annuities pay income during retirement
and thus their appeal.
Growth oriented investors interested in buying an annuity will
most likely be attracted to variable annuities. These contracts
offer a menu of investment options similar to mutual funds. One
can earn far more than the 3.5% that fixed annuities currently
offer. However, the variable annuity investor can also lose money
if the investments decline.
An investor undecided about buying an annuity form the above
two options might buy an equity indexed annuity. This is
a fixed annuity with guaranteed principal but the interest rate
is determined by how well the stock market performs. So when you
buy an index annuity, you gain features or benefits shared by fixed
and variable annuities.
Buying an Annuity—How It’s Done
Annuities can be purchased through a licensed life insurance
agent. Most stockbrokers, financial advisors and many bank
employees are licensed to sell annuities. You can buy an
annuity from almost any financial institution even though the
issuer will always be an insurance company. Annuity buying is
as simple as writing a check and signing an application.
Who Buys Annuities?
The Committee of Annuity Insurers commission regular studies
on who buys annuities. The latest study shows:
Annuities are Purchased by Middle-Class Americans.
Eight out of 10 non-qualified annuity owners (80%) have annual
household incomes below $100,000. Only 4% have annual incomes
greater than $200,000. Almost half (42%) have annual household
incomes below $50,000.
People buy annuities to Improve Retirement Security.
Over 90% of non-qualified annuity owners agree that the statement
“you have done a very good job of saving for retirement”
describes them well. Further, they view their annuities as
contributing greatly to this preparedness.
Those who buy annuities are Happy with annuity purchase.
Owners demonstrate a unique loyalty and commitment to their
annuity purchases, with almost all (93%) reporting that they
still own their first annuity. |