After years of recommending annuities to clients, I am still amazed at how misunderstood the product is. It’s evident to all of us in the financial services industry that banks have done a terrific job of marketing CDs and insurance companies have done a terrible job at marketing and educating the general public about annuities.
Over the course of the next few messages from me you will find out WHY retail banks are recommending annuities to their jumbo CD clients and what they don’t want me to tell you about CDs. But first let’s start by clearing up just WHAT AN ANNUITY IS!
A simplified explanation is an annuity is a CD (certificate of deposit) with an insurance company. Much like a CD is a contract with a bank to pay you a specified return on your principal deposit, an annuity is a contract with an insurance company that also pays interest, can pay out income, or can be used as part of a retirement strategy. Both have maturity dates, pay interest and guarantee the account holders principal.
However, that’s where the similarities end. To guarantee the account holders principal, the bank has to PURCHASE insurance on your deposit from the Federal Deposit INSURANCE Corporation. Yes that’s correct, an insurance company actually guarantees your bank account.
Another major difference between the two products regarding how your savings are guaranteed is, insurance companies are required by law to have more than one dollar in actual CASH reserve for every dollar you have in your annuity account, regardless the amout. Conversely banks are only required to have less than 6% of your actual account value in actual cash reserve. The rest (up to the FDIC maximum) is covered by an INSURANCE policy issued by the FDIC not the U.S. government as most are led to believe.
So to dispel misconception number 1 about annuities: Annuities are as safe as bank CDs and in some cases more so.
In the next message I will explain what the different types of annuities are and what the specific benefits are for each one in regards to your retirement plans.
In the meantime, if you would like more information regarding annuities or have any questions regarding your retirement savings options feel free to contact me directly at 1-877-777-7055 or visit my website at localhost/delete.
Just Us Insurance is located in Southern California.
We proudly serve businesses and local residents in Corona, Murrieta, and Temecula.
Just Us Insurance operates throughout Riverside, San Bernardino San Diego, and Orange Counties
