Both variable and fixed annuities are usually sold as general investment vehicles with tax deferral until the funds are withdrawn.
Tax free municipal bonds, or even tax deferred, fixed annuities, may be more tax friendly than corporate bonds and taxable CDs .
The loss was primarily the result of lower sales of individual fixed annuities due to the low interest rate set by the Federal Reserve.
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Fixed annuities establish an income stream at the time of purchase.
But many are also in a very low tax bracket, nullifying the supposed benefit of the tax-free status of muni bonds or the tax-deferral of fixed annuities.
Fixed annuities sales soared during 2008-09 economic crisis when consumers had low risk appetite but the growing pace of market recovery has led to a decline in sales of fixed annuities.
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Inflation-protected annuities are less common than fixed annuities, and also more expensive, but they offer an interesting way to guarantee a stream of income for life that is protected against the ravages of inflation.
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Inside it, ING was selling variable and fixed annuities, which are mutual funds and bond-like investments wrapped in life insurance that, in policies like ING's, cost several times more than low-cost alternatives and provide minimal coverage.
Stewart Johnson, a securities analyst with Friedman, Billings, Ramsey, an investment bank, reckons that many of Genworth's lines, including fixed annuities and long-term care plans sold in the mid-1990s, along with a business in Britain that pays bills in the event of unemployment, were returning less than 6%.
At the moment, most retired people who want to top up their Social Security income prefer to buy fixed-rate annuities.
Life insurers' biggest-selling product of the late 1980s was annuities offering fixed rates much higher than could be obtained from other fixed-income products.
The answer is, overwhelmingly, insurance companies peddling high-cost, tax-deferred variable annuities with crappy proprietary mutual fund options and high-risk fixed accounts.
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Annuities are bought to generate income during retirement, typically through either a fixed or variable income stream.
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Annuities have their own set of drawbacks, including steep fees for income guarantees, fixed payments that could lose purchasing power amid future inflation and complicated mechanics that can take hundreds of pages to explain.
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