| The election is over but the economic and financial | | | | meltdowns. Americans have insured their homes, |
| fundamentals have not changed. Nor is change | | | | cars, health, life, business and retirement nest eggs |
| expected until the bailout programs loosen the credit | | | | without fear of safety. |
| market, the recession (or worse) runs its course and | | | | What about fixed rate and index-linked annuities? |
| economic downsizing reverses directions. Meanwhile, | | | | Again, never has a fixed annuity holder lost a penny |
| as I mentioned in this retirement blog, the market is | | | | due to market losses. Not only is there a clearly |
| unpredictably volatile, retirement accounts are down | | | | stated guaranteed minimum rate of interest, but |
| 40% to 50% from their 2007 highs and market | | | | index-linked annuities offer the potential to earn extra |
| investments are exceptionally risky. If consumers | | | | if the market-linked index rises. What's more, if the |
| tighten their collective belts between Thanksgiving | | | | market index falls - and that has been the case in |
| and Christmas as is forecast, expect a decided nasty | | | | the current market meltdown - the annuity is |
| turn in the stock market, shrinking jobs, falling | | | | guaranteed not to lose value. In addition to no |
| incomes and corporate failures. Where is a safe place | | | | market losses, annuity owners get income tax |
| for retirement assets? | | | | deferral on earnings until withdrawal, protection from |
| The part of the financial services industry that has | | | | creditors in most states, probate-free transfers at |
| largely escaped financial trauma has been life | | | | death, the right to convert to a guaranteed lifetime |
| insurance companies. Granted, AIG Corporate failed | | | | income, penalty-free withdrawals to cover |
| but their troubles were not related to "insurance" but | | | | emergencies and total control over their money if |
| to unregulated Credit Default Swaps. The insurance | | | | circumstances change. |
| subsidiaries of AIG suffered "guilt by association" but | | | | Fixed annuities, especially index-linked annuities, have |
| have maintained their financial strength rating as | | | | gotten a bad rap from Wall Street in recent years, |
| independent entities. No doubt these insurance | | | | primarily because their popularity has taken mutual |
| subsidiaries will be the primary assets that are sold to | | | | fund and variable annuity sales away from stock |
| repay the bailout loan extended to AIG Corporate by | | | | brokers. While the current meltdown has created |
| the federal government. You're probably asking | | | | massive losses for market investments, fixed |
| questions about the solvency of the insurance | | | | annuities are loss free, earn a guaranteed rate at a |
| industry and the safety of their products, especially | | | | minimum and will pay extra interest if the market |
| fixed annuities. Let's take a safety tour of insurance | | | | recovers. Annuity owners are not postponing |
| companies. | | | | retirement, leaving retirement to find jobs or |
| First and foremost, insurance companies have an | | | | spending sleepless nights worrying about market |
| operating history of stability that is the envy of | | | | losses. Savers will never get rich by choosing fixed |
| banks and brokerage firms. Their investments are | | | | annuities, but may very well stay rich. |
| limited to conservative, boring options that rarely | | | | Don't be surprised if the financial professional who |
| carry inordinate market risks. The products they | | | | introduced you to annuities calls and says: "your |
| offer must first be approved by the state Insurance | | | | money is safe, and you have no losses - if the |
| Commissioner to assure suitability for the general | | | | market recovers, you'll do even better". It might be a |
| public and guard the insurance company's solvency. | | | | good time to think about converting more of your |
| There have been failures - mostly small - that have | | | | "market" money to fixed annuities. Stock broker |
| occurred in troubling economic times. When failure | | | | don't have much good news these days because if |
| seems likely or actually occurs, the home-state | | | | you followed their advice you have massive losses. |
| Insurance Commissioner swings into action armed | | | | Of course, they are still giving you advice about |
| with powerful regulatory might. Insurance | | | | where to put, or keep, your money - I suppose the |
| Commissioners have the power to levy fees on | | | | theory is "the more they're wrong the higher the |
| other insurance companies operating in the state to | | | | probability they'll guess right next time". I don't like |
| pay for rehabilitation, merger or liquidation of failed | | | | that theory and neither should you. Safeguard your |
| insurance companies. This system has worked | | | | retirement money because "retirement is the largest |
| flawlessly, because not one insurance policyholder has | | | | purchase you'll ever make and you can't borrow the |
| lost a penny of their invested principal with an | | | | money to pay for it". Your retirement nest egg will |
| insurance company. Bear in mind, insurance companies | | | | pay for the last one-third of your life...safeguard it |
| have survived world wars, global depressions, | | | | wisely. |
| scandals, government failures and stock market | | | | |