Saturday April 1, 2006
Finding A Good Annuity Insurer
Annuities, I believe, should be a core “wrapper” to hold a large part of your retirement savings. Annuities give you the advantage of deferring taxes on your investment income and gains until the annuity income is paid out some time later. So annuities function somewhat like IRA or 401(k) accounts. They give you important tax advantages with one major difference — while there are limits on how much you can put into an IRA or 401(k) each year, there are no limits on the amount of money you can lodge in an annuity.
With a deferred variable annuity, you are able to invest some entry amount and then make additional monthly or quarterly payments. You are also able to invest your annuity money in a series of different mutual funds. So if you select high-quality funds and prudently diversify your annuity portfolio, you can achieve significant gains with better compounding because of the tax deferral.
Over the last several days I have been screening insurance companies that offer annuities. I looked for insurers that had four characteristics: (1) exceptionally strong financial ratings from independent rating agencies; (2) a good array of funds to choose from; (3) attractive pricing; and (4) good product information and customer service.
I phoned and sent emails to a number of insurance companies that had strong financial ratings with specific questions about their products. Here’s what I found.
Fidelity — the mutual fund super store — happens to have the industry’s lowest priced annuity product and very good online information about annuities in general. Its specialists actually phoned me within minutes of receiving my email. On a weekend, no less! Fidelity’s annuity specialists proved to be extremely knowledgeable and helpful. I was impressed.
I found Schwab to be exceptionally client-friendly as well, with good on-line information about its products and a 1-800 number to call for additional information. The annuity specialist I spoke with was top-rate, and Schwab also has excellent annuity products [although a bit more expensive than Fidelity’s bare-bones product].
Those two companies make it easy for you to learn about their annuity offerings. Many other insurers, however, are not particularly receptive to enquiries from prospective clients. In most cases, you are meant to contact their “sales representatives”. And finding one can sometimes be a chore.
I filled out on-line “product inquiry forms” for information from a number of insurers. Days later, I had yet to hear back from them.
Genworth, General Electric’s insurance and annuity subsidiary, notified me that an agent would contact me “in 3 to 5 business days”. Fidelity, meanwhile, had responded one half hour after receiving my email — quite a difference. Even so, I am looking forward to speaking with a Genworth representative because that company’s annuities have some particularly attractive features.
And some groups such as American Scandia, a subsidiary of Prudential, also appear to have excellent annuity products, but that company transferred my phone call so many times that I finally gave up on it.
If you’re looking for annuity help and customer service, you will find Fidelity, Northwestern Mutual, and Schwab to be good places to start. I’ll keep you posted about my search. But so far, I can tell you that I am highly impressed by the above three insurers in terms of their fund offerings and customer service. On the other hand, many other annuity firms need to overhaul their web sites and develop a substantially more “customer-friendly” service culture. All of the companies I have cited have particularly good products. But some companies do not make it easy for the public to become better informed about them.
Meanwhile, take the time to learn more about annuities, yourself. They can help you amass more retirement capital as you save and invest. They are the powerful instruments that deserve a lot more investor attention.
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