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Question #1. Are annuities safe?
Answer: Annuities are life insurance type investments and consequently they are subject to the full federal and state regulations. An insurance company must keep 100% of your principle in reserve. While a bank on the other hand is required by law to only have 6% of your principle in reserve for your CD or savings account.
Question #2. I am in a Annuity and my principle has gone down considerably. I thought that the principle was guaranteed?
Answer: You are probably in what is called a variable annuity. Your principle is invested directly in the stock or bond markets. So yes, it is subject to market fluctuations. I would recommend that you consider switching to a fixed annuity. Your principle will not be at risk in this investment. You may not earn as much when the stock market has a good year but you will certainly sleep better when the stock market has a bad years and your principle is safe and increasing. As a CSA I will never sell my clients a Variable Annuity; for that they can go elsewhere.
Question #3. What is a good mix of fixed and variable investments. I like the stock market but I don't want to risk my retirement?
Answer: I tell my clients to use the 100-your age rule and put that as a percentage in variable. For example, if you said you were 70 years old, take 100-70 = 30% Put about 30% of your investments in variable investments. That your starting point, adjust down or up depending on your comfort level.
Question #4. I want income for life that I will never outlive. What can I do?
Answer: Consider funding an immediate annuity that will pay you a monthly income stream for as long as you live.
Question #5. Can an Annuity shelter my income from Medicaid?
Answer: An annuity, being a life insurance vehicle may provide some relief if you end up on Medicaid depending on the laws in your state but that should never be your primary reason for having an Annuity.
Question #6. Can an interest earning tax-deferred annuity outperform a CD?
Answer: The annuity will almost always pay a higher interest rate to compete with the banks and by not getting a 1099 at the end of the year to pay taxes on your effective yield will out perform the bank CD significantly in the long run will still giving you access to your money, usually up to 10% per year.
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