There are several ways to judge an annuity company:
- financial stability
- product quality
- performance history
- expected future performance
Each of the above considerations is an important component in selecting the best annuity companies. Unfortunately, it is almost impossible to find an annuity with a perfect score. There is often a conflict between performance and financial strength.
Insurance carriers are a little like commercial bonds. The highest rated bonds pay lowered interest rates than those further down the financial quality ladder. They may all be classified as investment grade, but some will pay a better return than others. Likewise, the insurance carriers with the strongest balance sheets seldom offer either the highest interest accumulation rates or the most aggressive lifetime income payouts.
Product quality is somewhat subjective and there are no guides or industry wide scoring systems. For a while, Annuity Coaches monitored the total sales of various annuity products in hopes that they would provide some indication of product quality. However, we abandoned that practice, because the policies with the highest sales volume are seldom the best products in our opinion. Far too often, the sale leaders are the policies with the highest commissions.
Projected performance: Predicting the future is impossible, but the structure of an annuity policy can give us some indication of how well it will perform. For example, assume that two policies offer a point-to-point annual S&P indexing strategy. If both carriers invest in the same mix of commercial bonds, we can expect their returns to be similar. Therefore, if one for caps at 5% and the other at 2.75% the difference has to be somewhere in the policy structure.
It is not uncommon to find one annuity with an earnings cap almost twice that of another. Unless the past history of the carrier shows this discrepancy to be a bait and switch tactic, we can reasonably assume that the higher potential yield will hold for at least the intermediate future.
The biggest mistake consumer’s make in selecting an annuity policy is not taking a pencil to the policy features. They may take the time to compare policy features qualitatively, but Annuity Coaches has the software available to compare the most important policy features quantitatively.
In truth, the best annuity policy is not a universal concept, because everyone has different retirement needs. We all share certain common retirement goals, but we all also have specific retirement needs unique to our own circumstances and where we are in our retirement accumulation goals. Therefore, the best policy for one individual may be entirely inappropriate for another.
The best policy is the one that most closely matches your financial needs and the top company is the one that provides the required benefits at the lowest cost or the highest yield.
Annuity Coaches are experts at annuity selection and matching financial and retirement needs to policy features. Ask for our help. It could add thousands to your retirement resources.
Please work with an expert at matching your individual financial and retirement planning needs to the most appropriate annuity.
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