Treasury rates are low and will likely remain that way until the economy shows tangible signs of recovery.
The Federal Reserve has tamped down Treasury yields through quantitative easing and bond buyback programs in order to stimulate the economy. Federal Reserve Chairman Ben Bernanke has publicly stated that the Fed will look to keep bond yields low until the employment numbers improve. And low Treasury yields equate to low fixed and fixed indexed annuity rates.
It’s certainly not hard to beat the returns on most any certificate of deposit these days. Bank lending rates are at all-time lows and haven’t really budged for the last four years. Three- to five-year fixed annuity accounts usually best comparable CD returns by a point or more.
The primary goals of most annuity buyers are investment safety, sustainable growth and future income. Those who have solely relied on dividend stocks and bond portfolios to provide income for their retirement needs have, at times, struggled through the boom-and-bust market cycles of the last 10 to 15 years.
Here again, insurance companies have become more creative with the release of the next wave of income riders. In the past, once income began, there was little the account owner could do but turn it off and on, depending on income needs.
Many annuities, either with or without an income rider, provide additional liquidity in the event the owner/annuitant needs convalescent care. This is helpful, of course, but it would not usually substitute for a traditional long-term care policy.
Very few income riders are offered at no annual cost to the annuity owner. Consumers need to understand that in most cases they cannot walk away with the income account value. That is why you will hear some agents refer to the income account value as the “ghost account.” The monies are not readily available for anything other than to calculate a lifetime income stream.