Best Annuity Rates

Understanding what the best annuity rates are begins with an exploration with what is, exactly, an annuity. An annuity is usually associated with a retirement plan, and is a product sold by life insurance companies to provide monthly income for a certain amount of time or in perpetuity, which is a term meaning no formal end. Many banks also offer the plans, usually sold by someone at the bank who has a license to sell life insurance. "Watch ye therefore, and always pray, that ye may be counted worthy to escape all these things that shall come to pass, and to stand before the Son of man." Luke 21:36) There are some important questions to ask, however, before looking to see what the immediate annuity rates are, and if they are acceptable for your situation.

The first thing to understand about this option is that someone is going to make a commission on the agreement. It is sold as a life insurance product, but instead of being given a lump sum at the death of the insured, the plan begins paying monthly or yearly to the insured either immediately at the time of the sale or at a future date. In many ways, the life insurance company, when it comes this plan, is putting the insured's money in the bank and letting it grow interest just as a savings account might do. This would be called a fixed annuity, which means your money will make a promised rate of return for the life of the policy. In this case, the buyer would be purchasing a fixed rate plan, and would be subject to the current and immediate annuity rates of return. On the other hand, if the buyer of the policy is not concerned about the fluctuation of the stock market, the owner may purchase what is called a variable plan and depending on the performance of money market funds attached to the policy, may actually offer the best plan rates available.

There are some advantages to buying this kind of policy, and may fit some individual's need for future or immediate financial security. First, the buyer can receive tax deferment on the money paid into the plan. That means not paying taxes until the policy begins paying out, and if the payout begins at a time the owner has turned sixty-five, a lower tax bracket may come into play. The buyer of such a policy can also receive lifetime payments if the option is to annuitize. In addition, a life insurance policy is usually included as part of the policy program. Plus, if the buyer decides in a fixed plan, the owner can count on a fixed rate of return for a lifetime.

Let's take the case of Mr. Bobblehead, who is a fifty eight year old man with only ninety thousand dollars in a 401 K plan. The man has a term life insurance policy that will expire on his sixty sixth birthday. The man's wife is ten years younger and can work until she reaches sixty seven. Mr. Bobblehead has been concerned about his life insurance running out and not being able to leave his children much of an inheritance. The man has started a small business that he may be able to take into his seventies. If so, buying a variable policy now might not provide him the best annuity rates, because of the state of the economy. On the other hand, getting the best annuity rates means perhaps he will buy a fixed rate policy, settle for the immediate annuity rates available and allow it to accrue interest.

That plan, plus including a life insurance policy with the plan may be exactly what Mr. Bobblehead needs. With the man's age, buying a life insurance policy up front as part of an annuity program just might answer most of his concerns. But there are other things that Mr. B ought to consider before making a final decision. First and foremost, in many ways this type of policy is much like a CD purchased at a bank. The fixed rate annuity will make about the same amount of interest as the bank offers its customers. The representative of the bank or the life insurance company Mr. B buys the policy from will make a nice commission. That is money that he could have put into a CD.

But the fact that the policy carries with it a life insurance policy was the deciding factor. Mr. B wisely shopped around for several weeks and decided on an east coast life insurance company that had been in business for over one hundred years. The man had read in several different journals that this policy could disappear if the life insurance company ever went belly up. Mrs. B was thrilled to know that if her husband died unexpectedly, she would continue receiving monthly checks until she too passed away. The couple promised one another that in twelve years, when the first policy check arrived, they would take the money and go that famous northwest coffee place at the mall. After all, by that time a cup of coffee there might cost five hundred dollars!

If this type of policy annuity is right for a person's situation, then that individual must decide on the immediate annuity rates, which would imply a fixed policy, or the best annuity rates, which would probably mean a variable plan. And like everything else based on the stock market, what is smoldering today may be ablaze in six months. It is kind of bizarre to listen to the claims of financial companies and life insurance companies on television ads. The basic idea they convey is, "trust us for your rock solid future." This writer has news for the reader: a rock solid future is not found in an annuity or a large investment portfolio, but in the Architect of the Universe!

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