Where to Get Top Deferred Annuities
During the Great Depression, when it became more difficult for people to deposit lump sums of money into a fixed annuity, life insurers responded by introducing a variation called a deferred annuity. For people who were concerned about their future security, annuities have long been viewed as the best solution. Even though they couldn't afford to hand over a lump sum of money, they were more than willing to contribute smaller amounts on a regular basis.
Deferred annuities holders were able to make regular contributions that were collected by the insurer and allowed to accumulate with interest credited over time. For many, these annuities were then converted to a guaranteed stream of income upon their retirement. This "deferral" of the income to a later time was the basis of the name of this new annuity product.
Deferred Annuities Today
Today, deferred annuities remain a popular savings vehicle for people who want to prepare for a secure retirement. The design and structure of today's deferred annuity is basically unchanged with the addition of some modern day features and restrictions that reflect the current tax, regulatory and competitive environments.
Deferred annuities reached the height of their popularity during the 1980's when sky high interest rates made fixed yield investments very attractive. As more money was flowed into deferred annuities, the number of annuity providers and product offerings proliferated making it extremely difficult for consumers to separate the best deferred annuities from the crowd.
Aren’t All Deferred Annuities the Same
The features and benefits of deferred annuities are fairly standard from one provider to the next. The accumulation phase is the period during which contributions are made. These can be made systematically or on an unscheduled basis.
The accumulation account is credited annually with a rate of interest that is usually fixed and guaranteed for set period of time. At the end of the guarantee period, rates are determined each year based on the yield performance of the insurer's investment portfolio and current market conditions. There is usually a minimum guaranteed rate. All deferred annuities share the same tax advantage that allows earned interest to accumulate free of current taxes.
At the time of distribution, usually at retirement, the accumulation account can be surrendered (free of charges if the withdrawal period has expired) or converted to an income annuity that will distribute periodic payments for the life of the annuitant or for a specified period of time.
Deferred annuities come with an additional guarantee of principal that is paid to the beneficiary in the event of the death of the annuity owner, however, once annuitized for income payments, any principal remaining after the death of the annuitant is retained by the insurer.
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Differentiating the Top Deferred Annuities
With that overview of deferred annuities as a backdrop, it would seem that there wouldn’t be too much to differentiate the top deferred annuities from the rest of the pack. The key differentiators come down to two key issues: 1) The strength and stability of the annuity provider and 2) the competitiveness of the interest rate. In order to ensure that you truly get the top deferred annuity, these two factors should not be considered exclusive of each other. In other words, the top deferred annuity would include both.
For all of the guarantees, security and promises of a deferred annuity, they are really only as solid as the strength and credit worthiness of the annuity provider. If the only differentiator of a deferred annuity is it high first year interest rate, careful consideration should be given to the financial condition of the provider and its ability to deliver on its promises and guarantees. Although it hasn’t happened very often (rarely, in fact), life insurance companies can fall under the weight of poorly managed investment portfolios, bad mortality experience, and lopsided balance sheets.
Most states have a guaranty association which will insure up to $100,000 of annuity benefits, but why risk the aggravation and sleepless nights when the more highly rated companies can offer competitive rates as well. The cost of extra security is cheap if it means accepting a rate that is a half of a percent lower.
Where to Get the Top Deferred Annuities
In order to get the best deferred annuities, the search should start at the top of the list of the most highly rated annuity providers. By limiting your search to these companies, you can streamline the process and reduce the amount of time, energy and frustration it takes to wade through 100s of providers and their products.
Companies that have received an A++ from A.M Best and AAA from Standard & Poor’s have met the strictest standards for quality, financial stability, and credit worthiness. Companies with less than an A- rating from A.M. Best or single A rating from S&P don’t need to be considered because you will still find dozens that rank higher.
There are several websites that offer a comparison of annuity providers and their various annuity products. The data is updated regularly so you will be able to see the latest in product features and interest rates. They enable you to sort the list by the A.M. Best Rating as well as by the current interest rate being offered. When you have narrowed your search to the top five or ten providers, you can request additional information on the product.
Knowing where to get the top deferred annuities can be as simple as knowing who the top annuity providers are. With a little bit of research, you will be in the company of the best.
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