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A fixed annuity is an accumulation planning vehicle that allows an individual to accumulate money they’re not going to need for at least 5-7 years. One of the benefits of this type of vehicle is that it offers a return significantly larger than usually offered in a bank CD or money market fund.  In addition it allows the money to accumulate on a tax deferred basis. In addition It is GUARANTEED by the Life Insurance company that issues the contract.  Even in this day and age  of Bailouts and failed financial institutions that GUARANTEE is extremely meaningful as not one investor has ever lost a nickel in a failed Life Insurance contract.

One might say its a perfect vehicle , why doesn’t everyone take advantage of it .  The fact of the matter is that countless contract holders have purchased billions of dollars of these instrument.  However there is one shortfall and that is that the investment does not allow an individual to participate in any growth ,other than a 3-4% fixed  rate of return.  Over an extended period of time this return can be ravaged by inflation.

The Insurance Industry’s answer to this problem has been the creation of a relatively new product called a “Equity indexed annuity”  This vehicle contains all of the other previously mentioned benefits with one major exception.  That exception allows a contract holder to also participate in the overall return of the stock market, most often the S&P.  That return despite what were currently seeing today has historically been in the 10% range over any 10 year period.

As a result an individual investor today owes it to him/herself to learn more about this near perfect investment that allows one to participate in the stock markets appreciation while protecting against a loss in the event of a downturn similar to what is being experienced worldwide today.

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Tags: annuity, cd, fixed annuity, henry montag, life insurance, money market fund

About the Author: Henry Montag is an Independent Certified Financial Planner as well as a CLTC. He’s been in practice since 1976 with offices on Long Island, New York. He is a contributing writer for The Moneypaper, a national financial publication, been my sourced by Investors business Daily, Long Island Business News, Newsday, Wall St Journal, The Moneypaper,Investment News, Senior Lifestyles and has held insurance and securities licenses for over thirty years.

This entry was posted on Friday, October 10th, 2008 at 1:20 pm and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.