The change in interest rates has a very minimal affect on annuities in terms of the rates and benefits they make available as bonds are purchased when products are made and rate/benefits on those products are based off those bond yields. However, annuities with indefinite benefits may realize declining benefits if rates on new bonds purchased later are lower than rates that prevailed when the original bonds were purchased.
Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona
The are three basic tax deferred annuities that use differing crediting methods. Two of these methods are related to interest rates: fixed interest rate annuities and indexed annuities. Fix interest rate annuities are tied to the company's bond portfolio performance. With indexing, the company generally uses the interest rate earnings generated from the portfolio to purchase indice options.
Interest Rates directly effect all Annuities. But especially Fixed Annuities.
Basically, the higher rates are, the companies can offer more or better benefits on Annuity Policies.
An Insurance Company is required to invest enough of your premium into treasuries to secure any guarantees they made in the contract. So the higher the treasury rates are, the higher the guarantees in annuities are.
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Basically, the higher rates are, the companies can offer more or better benefits on Annuity Policies.
An Insurance Company is required to invest enough of your premium into treasuries to secure any guarantees they made in the contract. So the higher the treasury rates are, the higher the guarantees in annuities are.