Chap 6 Annuities 2

Chap 6 Annuities 2 - Support for annuities growing, but...

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Support for annuities growing, but concerns remain 08:23 AM CDT on Monday, September 13, 2004 By PAMELA YIP / The Dallas Morning News Mention the word "annuities" and many people's eyes will glaze over with boredom. Others might think of complicated financial products sold by fast-talking salesmen. But for savings-challenged baby boomers, those investment vehicles sold by insurance companies are being touted as the savior that just might mean the difference between enjoying a reasonable retirement and subsisting on cat food. At a time when pension plans are going under and Social Security is threatened, "we must encourage people to choose retirement vehicles that pay a guaranteed paycheck for life," says Frank Keating, the former Oklahoma governor who's now chief executive of the American Council of Life Insurers. Legislation in Congress follows that logic, proposing tax incentives for retirees to invest in annuities. But slowing the efforts are annuities' complexity and their bad image, especially variable annuities, which have been the subject of regulators' scrutiny over the way they're sold. The annuities industry recognizes that it has work to do, both to clean up variable annuities' image and to educate the public. "Consumers don't understand how annuities can help them meet their retirement needs, and that's the challenge for annuity providers today," says Mark D. Phelan, senior vice president of individual investments at Nationwide Financial. "Annuities are the only product that can offer them a guaranteed income for as long as they live, and as an industry, we need to help them understand that." An annuity is a financial contract sold by an insurance company that offers tax- deferred savings and a choice of payout options: income for life, income for a certain period or a lump sum. Annuities are part life insurance, part investment. The buyer, or contract holder, invests money among various mutual fund-like portfolios in tax-deferred accounts,
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similar to individual retirement accounts, or IRAs. The insurance portion is a stream of steady income checks in retirement and/or a death benefit paid to the contract holder's heirs. A fixed annuity invests the money in fixed-rate instruments such as bonds or
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Chap 6 Annuities 2 - Support for annuities growing, but...

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