Annuities---The Whole Truth

Oh yes, make no mistake, the index annuity has taken the annuity industry by storm. And just like any investment, there are many options in the index annuity.

The one option I am speaking of now is what is called the crediting method. This is what determines, how much money, if any, you get credited to your annuity. It is the formula the insurance company uses to calculate how much of the market performance you get to take advantage of.

There are many types of crediting methods. There is daily averaging, point-to-point, monthly averaging, etc. You might be asking yourself, what do those mean. Today, my point is to let you know that there are things you need to know.

So as great as an equity index annuity may sound, you need to know how that annuity credits you. And there is a huge difference between these methods. For example, it is totally possible that two different annuities with different crediting methods can perform COMPLETELY different. Based on the exact same market performance, one may credit you 10% and one may credit you ZERO...ON THE EXACT SAME MARKET PERFORMANCE.

My point...don't rush to get an equity index annuity. Take your time and analyze your options before you do. Know what crediting method yours offers and understand the differences. Does it make sense to diversify crediting methods? Yes, it might...but only through educating yourself can you truly make that determination.

Ignorance is NOT BLISS

Tony Bahu
CEO
AnnuityMD.com

I recently read a really negative article on annuities in the paper and I was truly baffled. Most articles I read in the paper about annuities are negative...but then again, most everything in the news is negative. That's what sells.

This time, though, I responded differently. I called the journalist who wrote the article and asked why none of the good information about annuities was ever published. For example, this journalist wrote about the horror stories of people in variable annuities during the recent market decline.

"But what about the people who were in fixed and index annuities that not only didn't lose money, but made money in the down year?" I asked. The response was that this would not be noteworthy for news purposes.

But here's the thing. Variable annuities, fixed annuities, index annuities...you can't call them good or bad. Every investment is situational. Each annuity has it's purpose and it's place, AND ITS RISKS. But it is not fair to say that all annuities are bad...or good. Again, each one of those annuities have their positive and negative traits and it depends on the investors personal situation whether or not it is a good investment.

My advice---Do your homework when it comes to investing in annuities or anything for that matter. Don't just get swayed by one editorial without knowing the facts. Find good resources and look for good information to allow you to determine what is right or wrong for you...and seek the help of a TRUSTED professional who can guide you.

Ignorance is not Bliss

Tony Bahu
CEO
AnnuityMD.com

While these two may sound similar their are huge differences between fixed and variable annuities. A fixed annuity is basically tied strictly to interest rates. There is really no market risk to the money so losing money due to stock market fluctuation is not possible. Even though they can offer a lower rate of return when the market is down, they offer safety of principal and to many people, peace of mind.

The variable annuity, on the other hand, is quite different. It is normally linked to some stock market investment and can bear the same risk as the stock market. Variable annuities do enjoy the luxury of rising during stock market booms but they also participate in the falls when mutual funds and stocks are declining also. The biggest complaint about the variable annuity, aside from lack of safety, is often the costs associated to it. While some people defend them, they do tend to be a costly way to enter in the market. The benefits a variable annuity owner enjoys is the ability to switch mutual fund investments as often as possible without being taxed upon each move. Some argue this is worth it, although I am not quite convinced about this.

All in all, fixed and variable annuities are completely different. They offer different features and benefits and can be totally different vehicles. While the tax deferral and other things are similar, these two investment vehicle are totally different in their working. So which is right for you? Well, that all depends on your situation. There is no one right investment for everyone. Investing is personal and that's the bottom line. However, if you are looking for an annuity, keep in mind that annuities come in many shapes and sizes. They each offer different benefits and work completely differently.

If you are looking, make sure to find a trustworthy agent that can help you make the right decision. Also, don't be in a hurry to make that decision so it's not something you regret in the future. Do your homework and know your situation so you end up with something that fits you in the end. Annuities can be wonderful tax deferred investments for many people, however, as Elvis once said, "Only Fools Rush In."

Ignorance is not bliss...

Tony Bahu
Author of 'Annuities: The Shocking Truths Revealed'
http://www.AnnuityMD.com

Let me start by answering that question...if an annuity fits your investment objectives than there is no reason that an annuity should not go in your IRA. Okay all you smarty pants out there who keep arguing that it is tax deferred and it does not belong in your IRA...SO WHAT??? The fact that it is tax deferred is only one reason why people buy annuities.

Now, let me elaborate on my thoughts here. If you are buying an annuity strictly for tax purposes, then it is obvious that an annuity should not go into your IRA. However, there are many great benefits that an annuity can provide for an IRA. For example, fixed annuities are provide a safe way to get a return higher than a CD. So if you would put a CD in an IRA, why not a fixed annuity? So you'll already have the advantage of tax deferral but now you get the luxury of higher rates and a safe return. Furthermore, it is one additional way to diversify a portfolio. With a variable annuity (although I am not a fan of) you get a guaranteed death benefit. So no matter whether your annuity goes up or down, the death benefit can never go lower than the original amount invested (less any withdrawals). So there is an advantage that no stock or mutual fund can provide for you. So why wouldn't you use it?

The bottom line is that annuities are another type of investment vehicle. Although many professionals argue that they should not be used in an IRA, I believe that they have not fully thought about the benefits of an annuity. There are many benefits an annuity can offer and if these benefits match your needs, than I can truly say, it may be appropriate.

However, before you invest in an annuity, or anything for that matter, it makes sense to know what's right for your particular situation. Furthermore, it is good to know how annuities really work and which one is right for you. So for those of you who say an annuity is not right for an IRA, I'm sorry but you are wrong. The answer is it depends. It depends on the client's situation and what the client is looking for. If it can be found in annuities, then go for it...

Ignorance is not bliss...

Tony Bahu
CEO AnnuityMD.com
http://www.AnnuityMD.com

Okay, so I can tell you I have sat in front of countless numbers of people who have made mistakes when purchasing and owning annuities. And I have visited people who wish they never got involved in an annuity. And I have seen people who say that their annuity is their worst nightmare...So what is it that makes the annuity such a bad thing for some people and such a great vehicle for others??? Well I am about to tell you...and it all goes back to the annuity owners biggest MISTAKE. Yes, not mistakes but mistake.

Let me explain to you. Most annuity and insurance agents out there have what is called their "best product." IT is the product that can supposedly solve every investment need for any investor. And they make it sound so good that when someone is shopping for annuities, they ask the salesperson, "what is the best annuity?" and this is the biggest mistake. For all you know, the best annuity to the salesperson may be the one that pays the best commission to him. This question gets more people in trouble than any other question in the investment world..."What is the best ____________ (annuity, stock, mutual fund, etc)? Like I say all the time, there is no best investment because everyone's needs are different. Each investment has it's own benefits which have to be matched to an investor's needs.

So in essence, the biggest mistake is searching for the "best" investment. So how do you avoid the annuity owner's biggest mistake? By asking a better question? The best question is "What is the best investment FOR ME?" That question is totally different. You see, to further elaborate, the biggest mistake involves not doing your homework. When you don't do your homework and you look for the "best" investment, you will probably end up with something that you don't want. By doing your homework, you can figure out what you DO want and what you DON'T want. And when a salesperson presents something to you, you can quickly see if it fits your needs or not. If it does not, then the salesperson probably didn't do his job.

The bottom line is, always ask, "what is the best annuity for me?" And if the salesperson starts shooting out answers without asking you about your situation, then run...run and find another person. And before they ask you about your situation, it's a good idea to know your own situation. The more you can help a GOOD salesperson, the more they can help you. And remember, there is no "best investment." There is only a best investment for each person relative to their situation and their needs. And please remember...
Ignorance is not bliss...

I just feel compelled to clarify some things about these highly misunderstood vehicles. And for all intents and purposes, I am referring to the same vehicle when I talk about equity index annuities or index annuities.

First of all, whoever called the "equity" index annuities wasn't really thinking. The reason I say that is because many people confuse these for variable annuities. So let me set the record straight.

Index annuities are purely fixed annuities with the potential for gain if a particular index does well. For the most part, your principal is protected (check with your financial advisor). Now, there are many types of Index Annuities and many features in different ones, so I would advise anyone going into one to be cautious and to do plenty of homework before they get involved.

Furthermore, because their are so many "styles" of these vehicles, it sometimes makes sense to diversify. As the competition becomes more aggressive, the features tend to get a little more exciting. I would warn you, however, to make sure you go with a very high rated company. I think some of these companies may not know what they are getting themselves into. This would ultimately mean less potential for a client in the future or trouble for the annuity company.

I am not for an equity index annuity nor am I against it. I believe the index annuity can have a place in an investor's portfolio if chosen properly. What you need to know is that they are not ever going to "hit a homerun", nor will they "strikeout." They are designed to achieve a 1% to 2% higher return than traditional fixed annuities. Whether they do or not is a different story. Stay tuned for more information on the Index Annuity.

Ignorance is Not Bliss!!!

Tony Bahu
CEO
AnnuityMD.com
http://www.annuitymd.com

A.M. Best stated recently that it remains "cautious on the equity-indexed annuity segment due to its thin profit margins and management challenges during the continuing low-interest-rate environment."

For the full story, please visit:
http://www.bestweek.com/

While these two may sound similar their are huge differences between fixed and variable annuities. A fixed annuity is basically tied strictly to interest rates. There is really no market risk to the money so losing money due to stock market fluctuation is not possible. Even though they can offer a lower rate of return when the market is down, they offer safety of principal and to many people, peace of mind.

The variable annuity, on the other hand, is quite different. It is normally linked to some stock market investment and can bear the same risk as the stock market. Variable annuities do enjoy the luxury of rising during stock market booms but they also enjoy the falls when mutual funds and stocks are declining also. The biggest complaint about the variable annuity, aside from lack of safety, is often the costs associated to it. While some people defend them, they do tend to be a costly way to enter in the market. The benefits a variable annuity owner enjoys is the ability to switch mutual fund investments as often as possible without being taxed upon each move. Some argue this is worth it, although I am not quite convinced about this from a tax perspective.

All in all, fixed and variable annuities are completely different. They offer different features and benefits and can be totally different vehicles. While the tax deferral and other things are similar, these two investment vehicle are totally different in their working. So which is right for you? Well, that all depends on your situation. There is not right investment for everyone. Investing is personal and that's the bottom line. However, if you are looking for an annuity, keep in mind that annuities come in many shapes and sizes. They each offer different benefits and work completely differently.

If you are looking, make sure to find a trustworthy agent that can help you make the right decision. Also, don't be in a hurry to make that decision so it's not something you regret in the future. Do your homework and know your situation so you end up with something that fits you in the end. Annuities can be wonderful tax deferred investments for many people, however, as Elvis once said, "Only Fools Rush In."

Ignorance is not bliss...

Tony Bahu
CEO
AnnuityMD.com
http://www.AnnuityMD.com

Okay, so I can tell you I have sat in front of countless numbers of people who have made mistakes when purchasing and owning annuities. And I have visited people who wish they never got involved in an annuity. And I have seen people who say that their annuity is their worst nightmare...So what is it that makes the annuity such a bad thing for some people and such a great vehicle for others??? Well I am about to tell you...and it all goes back to the annuity owners biggest MISTAKE. Yes, not mistakes but mistake.

Let me explain to you. Most annuity and insurance agents out there have what is called their "best product." IT is the product that can supposedly solve every investment need for any investor. And they make it sound so good that when someone is shopping for annuities, they ask the salesperson, "what is the best annuity?" and this is the biggest mistake. For all you know, the best annuity to the salesperson may be the one that pays the best commission to him. This question gets more people in trouble than any other question in the investment world..."What is the best ____________ (annuity, stock, mutual fund, etc)? Like I say all the time, there is no best investment because everyone's needs are different. Each investment has it's own benefits which have to be matched to an investor's needs.

So in essence, the biggest mistake is searching for the "best" investment. So how do you avoid the annuity owner's biggest mistake? By asking a better question? The best question is "What is the best investment FOR ME?" That question is totally different. You see, to further elaborate, the biggest mistake involves not doing your homework. When you don't do your homework and you look for the "best" investment, you will probably end up with something that you don't want. By doing your homework, you can figure out what you DO want and what you DON'T want. And when a salesperson presents something to you, you can quickly see if it fits your needs or not. If it does not, then the salesperson probably didn't do his job.

The bottom liine is, always ask, "what is the best annuity for me?" And if the salesperson starts shooting out answers without asking you about your situation, then run...run and find another person. And before they ask you about your situation, it's a good idea to know your own situation. The more you can help a GOOD salesperson, the more they can help you. And remember, there is no "best investment." There is only a best investment for each person relative to their situation and their needs. And please remember...

Ignorance is not bliss...

Tony Bahu
AnnuityMD.com
http://www.AnnuityMD.com

When deciding which annuity to buy, the most important thing to know is that you must buy the best annuity FOR YOU. Most people make the mistake of trying to find the world's best annuity. However, the mistake is that each annuity has its advantages and disadvantages. So what may be the perfect annuity for one person, may be the worst annuity for someone else. So how do we overcome falling into the "best annuity trap?" Well, the best way is to really define your goals such as:

-What is your timeframe?
-How soon will you need the money from your annuities?
-Do you want more liquidity or more returns?
-Is this annuity investment for income or long term growth?
-Is safety of principal more important than getting a great return?
-Do you see a need to ever pull money out of your annuities in case of an emergency?

These are just some of the questions you need to know the answers to BEFORE you begin the purchase inquiry whether it is for fixed annuities, variable annuities, or index annuities. The biggest mistake people make is not knowing what their own goals are. This is very hazardous when it comes to investing. Even more dangerous is when your investment professional sucks you into the "best investment" trap (investment of the day). A great professional will help you decide what is best for you by asking you about your goals. If he doesn't, you'd better run.

With that in mind, think about this. More money went into the U.S. stock market in March of 2000 than in any other time in the history of the markets. Do you think it's because everyone properly assessed their goals and decided it was the right time to jump in the market...I would guess not. It's the greed and the emotion and the fact that most people want to go "where the money is" instead of investing for their own goals. And what did the market do after that...well, you know the story.

So now that you know this, sit down and try to determine what your objectives are. Take some time and look at what you are already doing. See if what you are currently doing is working for you or not. If it is, great, and if it isn't then change.

Just remember, invest according to your goals, not according to whether you think the stock market is going up or down. Invest according to what your future depends on, not whether you think interest rates are going up or down. In the long run you will be much happier and probably much better off financially.


Ignorance is not bliss...
Tony Bahu
CEO
AnnuityMD.com
http://www.AnnuityMD.com