Annuities – The Good, The Bad And The Ugly

Annuities: The Good, The Bad And The Ugly

Carmen I. Bississo, CIMA?, AIF?, CLTC, CAS?, CFS? Director of Advanced Strategies

Securities offered through Royal Alliance Associates, member FINRA/SIPC. Investment advisory and insurance services offered through Cassaday & Company, Inc., a registered investment advisor not affiliated with Royal Alliance Associates.

Objective

Overview of annuity products to help provide a general understanding of how these contracts work, dispel myths, and help sort through the good and the bad to determine

when an annuity is the right fit in a financial planning portfolio.

Definition

"An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time.

The period of time when an annuity is being funded and before payouts begins is referred to as the accumulation phase.

Once payments commence, the contract is in the annuitization phase."

Source: Investopedia

Fixed Annuities

? Pay a fixed rate of return.

? Although the rate on a fixed annuity may be adjusted, it will never fall below a guaranteed minimum rate specified in the contract.

? This guaranteed rate acts as a "floor" to help protect owners from periods of low interest rates.

? Any guarantees are contingent on the financial strength and claims-paying ability of the issuing insurance company.

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