Low Interest Rate Environments and Fixed-Rate Annuities

annuity educationThe misconception out there is that since we are currently at historic lows when talking about interest rates, that annuities are unattractive for people saving for retirement.  According to Tim Grant from the Pittsburgh Post-Gazette, “With so much uncertainty in the markets in recent years, it’s not hard to see the appeal of a fixed annuity as a secure way to save and generate guaranteed income during retirement.”  Now there are a few things with this quote I’d like to address.  First off, I agree that the current rates insurance carriers are offering on their traditional fixed annuities aren’t attractive right now, but neither are CD rates.  A traditional fixed annuity is one where the insurance carrier guarantees a fixed rate of return for a specific number of years.  The longer you hold the product, the higher the rate will be.  For example, Athene is offering 2.75% on their MaxRate 5, a five year product.   Traditional fixed annuities have the look and feel of a CD, except these products are tax deferred, and have the triple compounding effect.


Fixed Index annuities with the many different guaranteed lifetime income riders on the other hand, are a great way to generate guaranteed income during retirement.  These products will guarantee a specific amount of growth each year you, or your client is in deferral.  Once you or your client is ready to start income, there’s usually a specific percentage (based on your clients age) that will determine what payout you or your client will be receiving for the rest of their lives.  Some of these guaranteed lifetime income riders will even have an inflation adjustment each year, to help keep pace with inflation.  Now there are many different types of fixed index annuities, and many different guaranteed lifetime income riders.  It’s important to know the benefits of each when determining which one is a fit for you, or your client.  Here at Retirement Think Tank, we specialize in education consumers and advisors on the many different fixed index annuities and guaranteed lifetime income riders out there.  Visit us today, and lets us educate you!

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