Financial Planning AnnuitiesStrategy for High-Interest Annuities

This is financial planner Patrick Munro talking
about strategies for high interest annuities. Well, like any financial instrument that you
want to have high interest, with high interest comes higher level of risk. Looking at our
spectrum of annuities, the highest level of risk, we'll talk about in a moment. Let's
talk about the lowest level of risk.

That would be a fixed annuity. That's a declared
interest rate, you know where you stand, normally it's just above the cost of living, but at
least it's 100% safe and guaranteed by the insurance company. Next we have our equity
indexed annuities which allow you to participate in the stock market but there is no possibility
of down side risk. However, there's a cap on how much you can make on your interest
rate which is a risk premium for the protection that's offered on the down side.

Finally if
you're looking for the highest level of interest in an annuity, you'd be looking at a variable
annuity. What it is, it allows you to participate in the stock market linked returns using mutual
funds that are wrapped in a vessel of life insurance, therefore making it a definition
of an annuity. I caution you, though, that variable annuities are just that. When the
market is up, you can get a better rate of return, which is the highest interest strategy
available but the market is down, you also go down and there is normally no protection
on the way down, which means you have to make up for that difference over time.

That is
the strategy for high interest annuities. I'm financial planner Patrick Munro..