Fixed annuities are typically thought of for their safety. After all, you can't lose money due to stock market declines when you are in them, right? Yes, but that does not necessarily mean they are safe.
Even though fixed annuities are safe in terms of not losing money in the market perspective, one thing you must consider is that there are other facets to them that may make them unsafe. The first thing is their lack of liquidity. Sure there is a tax deferral component, however, one thing to consider is that if you NEED the money, you might have to pay some penalties to get to it. This is often referred to as the surrender charges. Often times, these surrender charges can be quite steep on your annuities. This makes them risky from a liquidity stand point.
Another factor to consider is the rating of the insurance company. Now, if you ask me, ratings aren't necessarily the ‘end all’ when it comes to safety. In a non apple-to-apple comparison, Merrill Lynch had Enron rated as a buy as the stock slid from its peak to single digits. Ratings aren't always to be trusted and this holds true for insurance companies as well. The safety of an insurance company determines the safety of your annuity as well. It is important to do your due diligence and do it well when choosing an insurance company.
There are also many other factors to consider when it comes to choosing your fixed annuities that will determine their safety.
To learn more about the safety of your fixed annuities , please visit AnnuityMD.com.
Tony Bahu is author of the controversial book, ‘Annuities: The Shocking Truths Revealed. ’ This book exposes the shocking secrets about annuities that agents and insurance companies can't want you to know. More information about annuities can be found at, AnnuityMD.com