Monday, April 10, 2006

Best Annuity Rate

Often times, people are looking for the best rate on a fixed annuity. However, best rate doesn't mean it's the best annuity. Let me explain. In order to give you a bettter rate, an insurance compnay must 'have a reason' for giving a better rate than any other company. In other words, there is often a tradeoff.

Mostly, this tradeoff may come in the form of less liquidity, more time before surrender charges go away, less features, etc.

The point is, nothing is for free. There are always tradeoffs when it comes to investments. If an insurance company is giving you something, they are often taking something away. My favorite example of this is the bonus annuity. Many people compare annuities by their bonuses. However, what you must understand is that bonuses cost something in the long run. Often, the bigger the bonus, the longer the timeframe of the annuity.

Another place a bonus make up for itself is by not giving as good of a rate in subsequent years.

The bottom line is, nothings free in life or in the annuity world. If you are getting something just know you're giving something up. So really, it's not a problem if you understand this. Just remember, best rate does not necessarily mean the best annuity...

Tony Bahu

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