Should you make a time commitment of eight, 10 or 12 years? It depends on your own individual situation. If you’re going to need the money a year from now, then obviously no. However, if you’re not going to use the money, or if you’re not going to use more than 10% per year, many people like to go a little bit longer. A longer time period is often accompanied with a bonus the very first day. If you will go eight years right now, you can get a 5% bonus. If you opt for 14, 15, or 16 years, some of those are paying 10% bonuses right now. So if you’re not going to use the money, a longer time commitment may not be a bad idea. Let’s say you put in $100,000, and you get a 10% bonus the first day. Now your account value is $110,000. If you die six months later, your beneficiary gets $110,000 paid to him or her in a lump sum with no waiting. That 16 years is for you while you’re living—not for your beneficiary once you’re gone. Your beneficiary can get the money and do anything he or she wants to with it without penalty. It is not a life insurance policy, but it is kind of like having one if you die prematurely.
There are three ways to have your money completely protected against losses. The first is FDIC insurance. In a one-year CD right now, the rate of return is going be about 1%, which is not acceptable to most people. The second way is treasury bonds. If you buy a 10-year treasury right now, you will get about a 2% rate of return. The third way to have your money completely protected against losses is with a guaranteed insurance contract. The best guaranteed insurance contracts historically average about a 6 to 8% rate of return. A good guaranteed insurance contract allows you to go up with the market, lock in your gains, and when the market goes down, you don’t lose anything. You do receive compound interest, and there are no fees.
The reason people decide to put an annuity inside an IRA account is simple… the benefits it affords you. You choose the investment for your IRA based on the benefits it provides you. You can put any investments you want inside an IRA. For an index annuity, the benefits you receive are tailored towards your IRA: safety of principal and growth. That’s what most people want.