Would Annuities fit in your portfolio?

Annuities have an appropriate and valuable place in your portfolio. Let�s compare them to two other popular products � mutual funds and bank certificates of deposit � to see where they fit.

Bank certificates of deposit: These are clearly very safe, as the principal is guaranteed first by the issuing bank and second, up to a limit, by the FDIC. The interest rate you will earn is also guaranteed for the duration you select. If you choose to take your money out early, the penalty is typically very modest, equal to only a few months of interest. As a result of their safety and predictability, interest rates on bank certificates of deposit are usually fairly low.

Mutual Funds: These are securities, and that gives you a clue that we are now entering much riskier territory. The principal is not guaranteed by anyone. The return in any one given year can be sharply positive or negative. For example, a common proxy for stock fund returns is the S&P 500 index, which rose 26 percent in 2003 and dropped 38 percent in 2008. Thus, for mutual funds to attract money, they must offer the prospect of a higher likely return than indexed annuities. Over the last century, they have done so, although over the last decade, they have fallen woefully short.

Variable deferred annuities are long-term vehicles, designed to help your assets grow and provide a steady stream of income in retirement An annuity provides tax-deferral of any growth. No taxes are due until you take a withdrawal.Choice of investment portfolios. These stock and bond investment options may be managed by the same portfolio manager and have the same investment objective as a similarly named mutual fund. However, they invest in separate and distinct portfolios from any publicly available mutual fund and the underlying portfolios have different holdings and fees, so their performance can vary. Tax-free transfers among the investment choices. No taxes are due when you transfer money from one funding choice to another within an annuity.Guaranteed Income for Life. You can convert your investment into a steady income stream that cannot be outlived.Guaranteed  Death Benefits. A variable annuity can provide a death benefit that guarantees your beneficiary will receive at least what you contributed to the account, less withdrawals and fees, if you should die before the income payments begin. The death benefit can increase over time.

Talk to your financial advisor  and check if Annuities would fit in your portfolio according to your goals and needs.

If you have any question, please contact us for a free review:anecamara@mintcofinancial.com
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