Finding the highest paying annuity is easy, simply ask a local Annuity Coach.
At Annuity Coaches we have special search software at our disposal that can go deep into industry information databases and screen for any conceivable policy benefit or rate type. However, that search will only provide you with potential match candidates.
A rate search will find the highest current return, but it will not tell you which annuity will perform the best over time. We can screen for specific policy provisions, but the future is unpredictable and retirees normally need a range of policy features to maintain financial flexibility. That is why Annuity Coaches use screening software as only the first step in the selection process. The remainder of the process calls for expertise and experience.
A MYGA search is perhaps the easiest. Rates of return are guaranteed for a stated number of years and the policies have a streamlined structure as compared to more traditional annuities. Just select the time period desired and push the search button. When the guarantee period expires, if the renewal rate is not acceptable, simply repeat the search procedure and transfer the cash value to a new more competitive annuity using a Section 1035 tax free transfer.
Finding the highest paying fixed-interest annuity or equity indexed annuity is more problematic. The current rate on a fixed-interest annuity is usually guaranteed for only one year. The renewal rates are unknown and unknowable, but since the underlying commercial bonds have maturities of approximately ten years, their yield should not fluctuate significantly from year to year. Especially in the first few years after issue.
The company may have a historical track record of interest rates that it has paid, but those would be dependent on the bond rates earned from their commercial bond portfolio at the time that its previous policies were issued. The most important clue in a carrier’s historical yield data, is its rate consistency. Was it faithful to its rate at issue or did it reduce rates significantly after they had the buyer’s money? When shopping for fixed-interest annuities screen for the highest current yield policies that have the features you need to protect your retirement. Then examine the carrier’s track record for signs of rate integrity from year to year.
The finding the highest paying equity indexed annuities presents a similar challenge. The current cap rate offers a useful comparison metric and it is reasonable to assume that a policy with a high current cap rate will also be one of the higher cap rates in the future. The success of an indexed account is dependent on commercial bond interest rates because they provide the money to purchase the stock market hedges; the cost of the hedge itself; and the rise or fall of the specified market index.
Since carriers are most likely to purchase commercial bonds of ten-year duration, the amount of interest can be reasonably expected to remain relatively level during this period. The only certainty in the stock market is that it will always fluctuate. So the market entry point (date of policy purchase) will have little long-term effect on returns. The effect of the market entry point will be further offset by the reset effect. As the hedge period expires, new hedges will be purchased at different market levels for the next holding period. Hedges obtained when the market is high, may result in poor earnings for that holding period. However, hedges purchased near the bottom of a market downswing will be making money while the traditional investor is still trying to break even. (see “The Magic of the Reset” coming soon!). The big unknown in future indexed policy performance is the cost of the hedges.
Finding the best hybrid is even more complex. Evaluating the potential performance of the base indexed policy is of course the same as any other equity indexed annuity. However, the guaranteed lifetime withdrawal benefit (GLWB) rider specifies: a number of optional future payouts, a minimum accumulation guarantee and a percentage charge against cash values. Three metrics that can be measured and compared quantitatively.
The key to finding the best hybrid annuity is to first select a number of policy candidates based on their relative expected equity index performance and then measure the cost/benefit structure of the GLWB rider. Your local Annuity Coach has the software and expertise to assist you in finding your best-buy retirement annuity.
Please work with an expert at matching your individual financial and retirement planning needs to the most appropriate annuity.
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