Annuities: High Yield Safe Investments

So you’re looking for high yield safe investments for your retirement….  What are your options?

If you look hard enough at the best search engines on the web or in the classified pages of newspapers, you will find investment offerings like tax liens and private real estate investment note offerings yielding 8% to 12% or sometimes more.

Please, send away for a prospectus.  The reading is revealing and interesting- generally you will see that you, the investor, retain ALL risk associated with the offerings.  The companies, many with no credit rating and no track record, simply promise to pay… with no guarantee, personal recourse, history, or track record to back it up!

So much for safety!

Go to the opposite extreme for true safety, and you are stuck with government notes.  As of this writing, they yield less than 0% due to market turmoil.  But even when prices are normalized, T-Bills are in the 2-3% range.  Investors worldwide are therefore willing to lose money over the short term and give it to the US government to use, rather than invest in any other instrument.  Likewise, certificates of deposits are low yield, and after the bank failures, these hardly seem like low risk.

So much for Yield!

High-yields go out the window for safety, and safety is illusory!

So, what to do….

Investors in a cash position should congratulate themselves for being prudent and safe. But you know your need to step out into the market again soon.  Many need to place cash in a high yield safe investment that avoids the volatility of the current markets. Is this an oxymoron?

How about an investment with the safety of a CD, but the yield of a mutual fund… Would this work?   If you think this is too good to be true, read on…..

A great high yield safe investment comes in the form of a fixed annuity from a highly rated insurance company.  Insurance companies take in premiums and make investments, but you enjoy one major advantage in an annuity over a bank CD- …..  Tax deferred appreciation on your investment.

Insurance contracts, such as fixed annuities, offer competitive rates and tax deferred appreciation of investment gains, yet give up very little to a risk premium associated with most other investments.    The biggest tradeoff is usually liquidity- access to your funds.

Financially strong insurance companies have very small leverage ratios in comparison to banks, so in addition to stringent state regulation, these companies suffer much lower default risk than banks.  Also, state insurance guaranty funds back deposits up to $100,000 in most states.

Returns on fixed annuity contracts can exceed 5.5% in many cases with companies that have superior financial strength.  Plus, when you calculate that annuities enable investors to defer taxes and have the interest compound over time, you realize these are powerful tools.

For a complete primer on annuities, be sure to read  The Annuity Report and refer to the Annuity vs. CD comparison section for more information.

Also remember, to reach comparable safety with government backed notes of any kind, it is essential that you place your business with only the best financial institutions.  We give all the tools to select only the best companies in The Annuity Report .

Written By

Bryan Anderson

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