The advantage of safety with annuities.	back to home

The safety tax-deferred annuities provide consumers, is traditionally cited as the #1 reason consumers place their savings in tax-deferred annuities. Your tax-deferred annuity is safe because qualified legal reserve life insurance companies are required to meet their contractual obligations to you. Tax-deferred annuities protect your principal, your interest, and your ability to make withdrawals, when you need income.

There are independent rating services that examine the financial health of insurance companies, such as A.M. Best, Standard and Poor’s, Moody’s, Weiss Research, and others.

Only insurance companies have the financial strength and the cash reserves to offer the guarantees found in an annuity. Mandated reserve requirements mean that when a tax-deferred annuity is purchased, the insurance company, by law, must set aside dollar-for dollar reserves to cover all anticipated payouts.

The investment risk is assumed by the insurance company rather than by the owner. Always remember that tax-deferred annuities guarantee your principal and interest. When you purchase stocks or mutual funds, you, not your stock broker or the firm for whom they work, assume the risk of the stock market.

By investing in a tax-deferred annuity, this risk is absorbed by the financial strength and the cash reserve of the insurance company. Plus, there is a state guaranty association to help pay claims, should an insurance company become impaired. The Guaranty Association provides a safety net, and is similar, in a sense, to the way banks are able to insure deposits up to $100,000 through FDIC insurance. Hence, the "safety" of tax-deferred annuities.