Posted by A historical introduction to the classification of annuity insurance products in the United States
Annuity, called "annuity" in Chinese, or "annuity insurance", is an insurance contract.
Annuity insurance,It is an important part of the plan to receive lifetime income (USD) after retirement, and provides us with two important functions:
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- Tax-advantaged long-term savings/financing features
- "Guaranteed" retirement pension for life
Before starting this article, if you are not familiar with American annuity insurance, please move to the insurGuru©️ Insurance Academy course:Understand in 3 minutes what exactly is annuity (Annuity)?What can I use it for?Who are buying annuities?
In the U.S. family and individual retirement income annuity insurance market, U.S. annuity insurance products are mainly divided into the following four categories:
- Fixed Annuity Fixed Interest Annuity
- Variable Annuity Security Annuity
- Indexed Annuity Indexed Annuity
- Immediate Annuity Income Annuity/Immediate Annuity
XNUMX. Fixed-income annuity insurance Fixed Annuity
Fixed-income annuity products, generally believed to have appeared in the United States in 1795, are also known as traditionalSavings annuity.It is also a more common type of annuity insurance.It is the basis for the various types of derivative annuity insurance.
For fixed-income annuities, the most vivid analogy is,It is the deluxe version of "fixed deposit"(Supercharged Certificate of Deposit)——As soon as we deposit the money in the insurance company, we already know the fixed rate of return that year, and this rate of return is often higher than the bank's fixed deposit.
The insurance company takes the premium to invest,The policyholder does not participate in the selection of investment targets,【Not Assuming】Any risk.
As of September 2023, 09, the annual interest rate of fixed income annuity insurance of each insurance company is3.5%-5%Floating range.
What kind of people are fixed income annuities suitable for?
Fixed income annuities are suitable forUnwilling to take market risks at all and need to guarantee the rate of returnconservative investors.
The advantages and disadvantages of fixed income annuities
| advantage | Disadvantage |
| ☑️ Income is higher than bank deposit | ❌ Interest rates may be adjusted as the Fed cuts interest rates |
| ☑️ Guaranteed rate of return | ❌ When the market environment is good, the rate of return is low |
| ☑️ Compensation for accidental death | ❌ There are some restrictions on liquidity |
| ☑️ Delay in paying taxes |
(>>>Recommended reading:What is a fixed income annuity?What are the advantages and disadvantages?Which type of person is suitable?)
Derivatives: MYGA Annuity, a multi-year guaranteed income annuity
Multi-year guaranteed income annuity (Multi-Year Guaranteed Annuity, ChineseMYGA Annuity),YesFixed income annuity insurancea type ofsavings annuity.
It's likeFixed Income Annuity Account和time deposit accountThe combination is more like a multi-year CDs product,Used to solve the problem of "traditional fixed-income annuities may send changes in interest".
The interest of traditional fixed-income annuity insurance, like bank deposit interest, will be affected by the Fed's benchmark interest rate.If the Federal Reserve cuts interest rates, the annual interest rate of fixed-income annuity insurance will also be reduced.
The advantage of MYGA's multi-year guaranteed income annuity insurance account is that when applying to open an account, you can choose to lock in a "guaranteed" fixed interest rate within a "guaranteed" time period.The time period for obtaining the "guaranteed interest rate" is usually 3 years, 5 years, 7 years, and 10 years.
As of November 2023, 9, according to the strength of the insurance brand and the guarantee period, the guaranteed interest rate of the MYGA savings annuity insurance account is distributed in4.00%-5.60%between, and fluctuate according to the interest rate environment.Before applying to open an account, you need to know the latest interest rates. You can subscribe to the weekly multi-year annuity insurance interest rate trend report email at the end of the article.
Who is the multi-year guaranteed income annuity account suitable for?
Multi-year guaranteed income annuities are usually suitable forOver 45 years old (near retirement age), completely unwilling to bear market risks with funds, hoping to lock in the current high interest rates in advanceGroups.
XNUMX. Security Annuity Variable Annuity
Securities Income Annuity Insuranceproduct, akaFund annuity.It appeared in 1952 along with the upsurge of the US stock market.Compared with fixed-income annuity insurance, the insured can have a securities annuity account,Choose different securities sub-accounts, such as mutual funds, ETFs, or indices for investment.
Securities Income AnnuityInsurance is characterized by,The policyholder bears [all] the investment risk, account income follows market investment performance.So it's more like an investment.
What kind of people are the securities income annuities suitable for?
Securities Income Annuitysuitable forWilling to take certain market risks and pursue high-yield potential,distanceAt least 10 years of retirementGroups.
Advantages and disadvantages of securities annuities
| advantage | Disadvantage |
| ☑️ Participate in the market | ❌ May lose principal |
| ☑️ Has high yield potential | ❌ Cost of additional fund management fees |
| ☑️ Compensation for accidental death | ❌ There are some restrictions on liquidity |
| ☑️ Delay in paying taxes | ❌ Product functions are complex |
| ☑️ Various investment targets |
(>>>Recommended reading:What is U.S. Securities Annuity Insurance?Advantages and disadvantages of working principle and applicable crowd )
XNUMX. Indexed Annuity (Fixed Indexed Annuity)
The enthusiasm of American investors was dealt a heavy blow during the "equity and debt double killing" in the 80s.Subsequently, index-income annuity insurance products formally appeared in the 1980s.
Index Annuity Insurance, called Fixed Index Annuity in English, abbreviated as FIA.
Compared with securities annuity insurance in the direct investment market,Index Annuity InsuranceThe biggest feature is thatThe policyholder [does not bear] the market risk.The premium funds do not directly participate in the market, but are only linked to the performance of the stock market index. There is a cap on the income, providing the guarantee of "capital preservation".
In order to increase market competitiveness, some index annuity insurance products allow policyholders to independently chooseBear a certain loss risk and cost"In exchange for higherIndex market returns are capped (e.g.Portfolio Annuity, RILA Annuity）.
What kind of people are index annuities suitable for?
Index annuities are suitable forUnwilling to lose principal.Pursue a certain market income potential, and there is still a certain year before retirementGroups of people.
Advantages and disadvantages of index annuities
| advantage | Disadvantage |
| ☑️ Linked market performance | ❌ The income is uncertain, and there is a cap |
| ☑️ Certain income potential | ❌ There are some restrictions on liquidity |
| ☑️ Compensation for accidental death | ❌ Product functions are complex |
| ☑️ Delay in paying taxes |
(>>>Recommended reading:Understand what index annuity insurance is in 1 minute?The advantages, disadvantages and applicable groups of index annuity insurance (latest version)）
Derivatives: Structure Annuity
Combination annuity, also called structured annuity, RILA annuity, or buffer annuity insurance, is a type of annuity insurance derivative product functionally between "index annuity" and "security annuity".
versusExponential annuityUnlike the 0% underwriting protection that is exclusively provided, the combined annuity account can choose to bear certain market investment risks in exchange for potential profit potential; due to the part of the risk assumed, losses may also occur.
The characteristics of the combined annuity insurance account are:The policyholder bears [part] of the investment risk, the account income will follow the market investment performance and may be limited by the bottom rate of return.
(>>>Recommended reading:[Popular Science Post] What is a combined annuity insurance account?What are the advantages and disadvantages compared to indexed annuity insurance?)
To sum up, the three types of annuity insurance accounts and their derivatives explained above are mainly used forThe "accumulation and appreciation" of funds and savings.The type of annuity insurance that American Life Insurance Guide Network will explain next isSpecifically designed for retirees to generate immediate lifetime cash flow income.
XNUMX. Immediate Annuity
Immediate Annuity, called in ChineseIncome annuity,Also known asImmediate annuity.
After the policy holder opens an immediate annuity guarantee account with an insurance company, he deposits a large amount of money at once (the funds usually come from life insurance accounts, IRAs, cash deposits, 401Ks, 403(b), other annuity accounts, etc.), insurance The company then pays pensions regularly on a monthly or annual basis.This is similar to the concept of "deposit and receive", which can be collected for a lifetime.
The characteristics of spot annuity insurance are:After depositing a sum of money, you can start receiving lifetime income [immediately].That's why it's called an "income annuity."
It is an insurance product designed to provide guaranteed pension income for retirees.
Pros and cons of immediate income annuities
| advantage | Disadvantage |
| ☑️ Simple and easy to understand | ❌ Irrevocable |
| ☑️ Guaranteed retirement amount | |
| ☑️ Guaranteed lifetime collection | |
| ☑️ Compensation for accidental death | |
| ☑️ Tax incentives |
When to Consider Buying an Immediate Income Annuity?
If you meet any of the following conditions, you can consider purchasing a spot annuity.
- The government pension is not enough to cover the daily fixed expenses after retirement
- Retire soon, or already retired
- Saved $200,000+ in retirement
- The body is very healthy and the chance of longevity is very high
- Seek "guaranteed" pension income sources and robust insurance products
Latest Income Rates for Income Annuities (01/2024)
| Estimated lifetime pension income for a one-time deposit of $200,000* |
||
| Male | Female | |
| lifetime pension income | ~$1,300/month | ~$1,200/month |
(*2024/01 current market interest rate, retirement situation at age 65. Please refer to the insurance contract for actual income)
Article summary
From "lumping deposit", immediate income annuities that provide lifetime pensions, to cash value accumulation annuities that provide various investment targets and fringe benefits, the annuity insurance in the U.S. retirement annuity insurance market is constantly being upgraded. , New products emerge in endlessly.
(>>>Recommended Use: Small Tools｜The American Personal Pension Smart Calculator, how much do I need to save every month?）
Different annuity insurance companies have different product types and product interest rates.For investors who purchase annuity insurance,The first is to choose your own "risk tolerance", and then choose different brands of annuity insurance products in the annuity insurance category under this "risk tolerance level".
Editor's note: You can subscribe to the monthly real-time interest rate of the multi-year savings annuity through the subscription window at the end of the article, or you can subscribe through "Annuity insurance self-service plan design tool” to learn about specific solutions tailored to your individual circumstances.
We hope that policyholders can first understand their own situation and risk preferences, and with the help of professional life insurance financial consultants, through comparison, analysis and reasonable choices, they can find the annuity insurance product that best suits them. (Full text ends)
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