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Advertiser Sunrise Financial: When Did ‘Annuity’ Become A Four Letter Word?


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BTB Advertiser Sunrise Financial Services wants to answer our Readers questions, and this month the question is “When did ‘Annuity’ become a four letter word?”:

by Janice Hammond

The trick to any successful portfolio is coming up with a variety of different types of investments that fit within your personal comfort zone and work together. Our firm has many, many tools to help our clients accomplish this. Some of these tools are annuities…

However, sometimes when I mention this word I get a lot of head shaking and resistance from people, “Insurance product? “No way!” they say. When I ask why, I get various answers like “They have so many fees and I can’t access my money” or “My Uncle had one and when he died my aunt didn’t get anything” or “The returns on them aren’t very good.””. This doesn’t surprise me; if you do any research on annuities you will find very conflicting and controversial opinions on them. Oh, and all of those responses are correct. Just not about most annuities.

Does that mean annuities are a bad investment? NO!! Are there some that have been misused and are probably not the best choice? Yes. There are many kinds of annuities, each serving different purposes when recommended to a client. I am going to give you an example of why one type of annuity might or might not fit into a customer’s portfolio, how it works and a few facts about it that may surprise you.

Like I said before, in addition to many other investments, we do use annuities in our practice. The one I use most frequently is called a Fixed Indexed Annuity. It allows you to still participate in a portion of the market gains, which are locked in every year, as well as guarantee you will not lose any of your principal if held to maturity. Annuities can also offer flexible payout options to help retirees meet their cash-flow needs. I would use this if a client is looking for a long-term investment (5-10 years) with principal protection for some of their money but doesn’t want to give up the chance to earn a reasonable return. I would not use it for a client that is looking for a short term investment or one who is seeking aggressive growth.

Janice Hammond of Sunrise Financial Services.

Benefits of a FIA:

  • The ones we use do not have asset management fees.
  • Some come with immediate bonuses on your initial investment.
  • Gains you earn are locked in annually and your principal is protected from market downturns.
  • After the first year you can access up to 10% per calendar year penalty free.
  • Returns are typically figured by tracking common indexes such as the S & P 500 using a variety of crediting methods.
  • The contract balance transfers at death penalty-free to the designated beneficiary.
  • All gains are tax deferred until withdrawal, although there could be tax penalties if the gains are withdrawn before 59 1/2.

Things to Consider:

  • Some do have surrender charges, the length and amount vary depending on the product.
  • There are caps on some of your returns that are adjusted on an annual basis.
  • Annuities are complicated long-term products. Be sure to work with an advisor who will explain caps, spreads, participation rates, and crediting methods to you.

I am sure everyone will agree that there is not one perfect investment out there. There is not one magic formula everyone should follow that will guarantee you the results you desire. The purpose of writing this isn’t to portray the annuity as the “perfect investment” or say every single client should have one. It’s meant to show when it’s part of a well thought out, balanced portfolio annuities can serve in an excellent capacity. If you would like more information on them, want to see historical returns or want a personal illustration; please contact our office, we would be more than happy to answer any questions regarding this or any other investment.

Janice Hammond
Owner/Advisor
Sunrise Financial Services
2108 SW 152nd ST Suite B
Burien, WA 98166
(206) 420 8520

To make an appointment, call the above number or email the Office Manager, Morgan Humphrey at [email protected].

Janice Hammond is a registered representative of and offers securities and advisory services through Madison Avenue Securities, Inc (“MAS”) a registered investment advisor, member of FINRA & SIPC. MAS is not affiliated with Sunrise Financial Services, LLC.

* These are based on current available products in WA and can vary from state to state. You could be charged fees if you chose to add benefits like joint payout or certain income for life payouts, called optional riders.

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