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Putting trust in an annuity account

08/04/11

In response to the question - "Should I trust income annuities?" - a recent CNN article inspected the benefits and potential risks of annuity accounts. The article notes that whenever a guarantee is offered on an investment, it's up to the investor to know precisely what is being guaranteed.

According to the article, the guarantees on immediate annuities usually refer to a promise of a monthly payment for life. Some companies offer annuities that include cost-of-living adjustments that account for inflation, and increase payouts by a set percentage each year.

In regards to how safe annuities are, the article notes that it depends on the company that provides the annuity. Consumers should look for companies that are rated highly by major ratings firms and consider spreading their money among several insurers. Additionally, CNN states that it's wise to "Limit the amount you invest with any single insurer to the maximum coverage offered by the guaranty association in your state. That limit is typically $100,000 or more for annuities."

LIMRA International reports that fixed annuity sales experienced a 27 percent decline in the United States in 2010, after 1 percent growth in 2009. On the other hand, variable annuity sales increased roughly 10 percent in 2010.

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