Are Annuities The Right Fit For Your Investment Portfolio
By the end of 2008 the Dow Jones industrial average had suffered a near record collapse. Many people solve their 401(k) plans suffer the same fate.
The market’s volatility prompted many people to look for safer investment methods for savings. One of the more traditional methods gained favor in many investment circles, and that is to buy annuities.
Annuities in the past had been considered bland and boring, but largely were considered safe investments. While annuities still offer a measure of security, investors should consider their options when investing in annuities. Here is why. Insurance companies sell annuities and while buying from an insurance company seems like a safe investment, your purchase is only as strong as the insurance company itself.
Insurance companies are fighting through the same battles that all businesses are fighting in this recession. There is much more risk for the investor today than there was 10 or 15 years ago. Many companies are having trouble meeting their obligations going forward so any reasonable guarantee that you may perceive is only as good as the company you invest with.
Deciding to invest in annuities is not a bad idea. Locking up your life savings or a substantial portion of your investment portfolio with one company, is a highly risky proposition. It would be better to spread those investment dollars with several different insurance companies.
Check with insurance rating companies such as Moody’s before investing with any insurance company. Obviously, the higher the rating the less risk. If you are going to be investing in annuities, you might as well invest with the strongest companies available to minimize your risk. If 2008 taught us anything it is that preservation of capital is still priority one.
The stock market and bond market continued to be extremely volatile making annuities even more attractive. However, the term annuity is a very broad and covers a broad spectrum of investment vehicles. Variable annuities, fixed annuities, immediate annuities and indexed annuities are just a few of the choices available.
Think about this. Insurance companies take investor proceeds and invest in the same markets and securities as everyone else. A history of the insurance company you are looking at is of paramount importance to the security of your investment.
There is enough information available to prospective investors to make an informed decision about your retirement dollars. Take the time and research insurance companies until you have a level of comfort and are satisfied with what you have found.
