This week’s focus remains on index annuities and variable annuities because of the rich mix of popularity and confusion regarding each of these products. I want you to have the most recent news and information on available products and strategies so you’re ready to make an informed decision when the time comes. In addition, you’ll find a reference to a very important article on federal spending that should remind you again as to why an annuity is likely to be the keystone financial vehicle in your retirement income plan. Let’s get started…
Are Variable Annuities Becoming More Efficient?
Leslie Scism writes in the Wall Street Journal about the move by investment managers to incorporate exchange traded funds (ETFs) into variable annuities. The main reason? ETFs are more cost effective and the result of this move would bring the overall cost of these products down, making them more attractive to potential investors. It doesn’t matter if the currently high fees are justified or not, but the fee structure of variable annuities has long been one of few valid complaints with the product. Lower fees and the resulting higher level of efficiency will make them better for consumers and also more popular with financial professionals. To read into the details of this transformation, click here for Leslie’s article.
What’s more, the article continues by showing further changes to variable annuities that is meant to not only make them more efficient but also more competitive with other products.
It seems to me that issuers of variable annuities are taking a page out of the fixed index handbook.
In the Annuity Report, the difference between these two products is clearly illustrated and it shows that index annuities provided better income guarantees because of a more stable underlying asset base.
With a variable annuity, the base account is exposed to the risks of the stock market. As such, companies have less control over future performance and must go light on the guarantees as a result. A stable asset base is the major advantage of index annuities to the benefit of the consumer and issuing company. How could variable annuities ever compete?
Well, this article describes a shift in investment strategies for the companies who manage variable annuity assets. In an attempt to protect the principle asset, management teams are working to implement indexing and hedging strategies that will limit downside losses in bear market while capitalizing on upswings during a bull market.
To me that sounds a lot like the value proposition of a fixed index annuity.
Why should you care about changes in the variable annuity landscape?
Variable annuities have achieved much greater reach in the retirement planning market. Index annuities are not as well understood but, by their nature, offer a better value proposition for the consumer. For clarification please refer to The Annuity Report for objective information on the difference between these two products.
My job is to present the information and give a clear interpretation of how these things will benefit you when it’s time to decide how you’ll choose to provide a source of guaranteed lifetime income in retirement. When you are ready, I look forward to hearing from you.
Investment Firms Show Interest in Fixed Index Annuities
You know, maybe index annuities aren’t as bad as the financial press would have you believe. In fact, this article from Insurance News shows that Wall Street financial firms are working to offer their own line of fixed index annuities. Click here to read the article.
As the products have aged and proved value over the last decade or more, the changing popular opinion means investment firms will have to alter strategies in an attempt to retain assets under management. Yes, the demonizing will slow down as more and more firms embrace the use of these safe-asset products. It’s the classic “if you can’t beat ‘em, join ‘em” mentality.
This will likely result in the movement of many more investment and insurance companies into this market. How does that affect you? Over time there will be a better competitive environment that leads to more product offerings and better contractual benefits. The market will continue to grow along with available choices for consumers.
That’s the major advantage of Annuity Straight Talk. You have me to do all the heavy lifting in product selection and loads of quality information that allow you find the best product out there for your specific situation.
And there’s one more thing I’d like to share with you this week…
Senators Propose Rigid Spending Cap- Andrew Taylor (AP)
How will any necessary budget cuts affect your plans for retirement? Well, if you don’t live under a rock then you know we have a mounting fiscal crisis in this country.
This AP release talks about a major proposal to reign in federal spending via a serious of cuts that is meant to shave $8 Trillion out of the government budget over the next ten years. You might want to read that again. The primary targets of those cuts are Medicare and Social Security. I’m not making this up… read the AP release.
I don’t want to spend too much time talking about the looming insolvency of those programs, but maybe it’s time for a quick quiz:
When you retire, how much control should you have over your financial livelihood?
a.) I want to cede all control to bankrupt government program whose administrators admit their own insolvency.
b.) I want to take control and make my own decisions.
Hopefully the answer is clear. It’s time to take a step in the right direction and make an appointment now! I look forward to working with you.
Bryan J. Anderson
800.438.5121 [email protected]