On this week’s Mullooly Asset Management podcast the topic is annuities. There are three types of annuities that Tom and Brendan discuss in the podcast. The three types are immediate annuities, fixed annuities, and variable annuities. One thing to keep in mind when dealing with annuities is that most annuities are sold, not bought. This podcast covers a lot of questions that people should be asking before they get involved with any annuity.

Tom and Brendan begin their talk by covering immediate annuities. When most people think of an annuity they are probably thinking of an immediate annuity. People think of these as an income stream, and that’s pretty accurate. You trade your money for a stream of payments that come in throughout the terms of your agreement. These can be utilized as part of a wise financial planning strategy if done correctly.

The discussion moves on to fixed annuities, and as Tom points out these are often marketed as alternatives to CD’s. However, nothing could be further from the truth. These are long term insurance contracts. While investors might get a fixed annuity that guarantees a rate of interest, it is normally only for a year or two. Since you will not get a 1099 form people tend to think this is a tax free alternative. They’re technically mistaken because they are typically tax deferred, not tax free. Fixed annuities might be attractive if you can get a good rate, or if you don’t plan on taking the interest out often. However there are negatives to be aware of. The negatives include the fact that you are locked into the interest rate you sign up for, and there could be a sales charge associated with the contract. The bottom line here is to read the information you are provided, and make an informed decision.Annuities: Questions to Ask Ask a lot of questions!

The last topic of this week’s Mullooly Asset Management podcast is variable annuities. These were created in the late 1970s and became popular in the early 1980s. The basic idea behind variable annuities is that they offer mutual funds inside of the annuity that you can mix and match. Things to keep in mind with variable annuities are that the mutual funds will have a higher volatility than a normal bank deposit. The reason for this is because the insurance company is going to try and make money with your money. Another thing to remember is that variable annuities carry a mortality expense built in because it is an insurance product.

There is a whole lot to take away from this week’s Mullooly Asset Management podcast, so make sure to tune in. It is full of insightful questions that you NEED to ask before you get involved with any annuity.

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