216- Which Came First: The Pyramids or Annuities?
Written by: Cary Carney, Vice President of Sales at Kuvare, Guaranty Income Life Insurance Company, a Kuvare company.
When you think of something with a long history, what comes to mind? Dinosaur fossils or perhaps caveman hieroglyphics? I’m guessing that annuities didn’t make your list. However, June is Annuity Awareness Month, so let’s look at their surprisingly long history.
Fixed annuities have been around for quite some time. To be exact, they have been utilized in the United States since 1759 when they were offered to Pennsylvanian Presbyterian ministers and their families. If you look back further, archeological evidence suggests the ancient Egyptians had an annuity for one of their princes. Keep in mind, the ancient Egyptian era started in 3150 BC!
A mere 650 years later in 2400 BC, the first bond was recorded. A stone discovered at Nippur, in Mesopotamia (now Iraq) shows a particular bond guaranteed the payment of grain by the principal and the surety bond guaranteed reimbursement if the principal failed to make payment. Corn was the currency of that time.
Stocks are a little tougher to pinpoint; however, information suggests that some semblance of brokering stock occurred as early as the 1100s. Although in 1602, Governor and Company of Merchants of London trading with the East Indies officially became the world’s first publicly traded company releasing shares of company stock on the Amsterdam Stock Exchange. The first stock exchange in the United States was the Philadelphia Stock Exchange in 1790, followed by the New York Stock Exchange two years later.
Certificates of deposit (CDs) can be traced back to the 1600s in the European banking system. The first Mutual fund? Well that would have been in 1774. A Dutch merchant, Adriaan van Ketwich, had the foresight to pool money from several subscribers to form an investment trust. The financial risk to the mainly small investors was spread by diversifying across several European countries and the American colonies, where investments were backed.
I write about this is to show if you look at the mainstream investment/savings vehicles, which most of the public recognize—annuities, stocks, bonds, CDs and mutual funds—annuities boast the longest history by a large margin. Annuities have existed for more than 5,000 years, with the next most popular category, bonds, only a mere 4,400-plus years. Obviously, I say that tongue and cheek, but why are we not taking advantage of all the great features and benefits a fixed annuity can provide?
Here are seven advantages to consider:
Principal protection: Your principal is protected if you honor the contract liquidity and time obligations.
Stable accumulation: Returns you can count on.
Tax deferral: Never pay taxes on your gains until you take them out of the product.
Longevity protection: An annuity can guarantee payments to you for the rest of your life through either annuitizing or an income rider.
Guarantees: Minimum guarantees are attached to many products.
Flexibility: Whether buying for accumulation, lifetime income, systematic withdrawals, long-term care or critical illness an annuity can accommodate many needs through retirement years all within one product.
Probate avoidance: When naming a beneficiary, in case of death of the annuitant/owner, the annuity will pass directly to the beneficiary, which could avoid inclusion into the estate.
As you can see, annuities have survived the test of time. These contracts provide several features and benefits that many other financial options cannot offer. In a time where returns on other safe money vehicles, such as bonds, CDs, money market accounts and savings accounts are not keeping up with inflation and the stock markets are at all-time highs, maybe it’s time to consider an annuity and diversifying your portfolio. It is Annuity Awareness Month after all!!