If you are going to buy annuities in Texas, it is important that you make sure that your agent is licensed with the state and also has a Financial Industry Regulatory Authority license. You should also make sure that the annuity you purchased is legitimate and in compliance with Texas standards and laws.
If you buy an unauthorized annuity, you may pay an inadequate return or put your money at risk. You can also become the victim of Texas securities fraud.
What is an Annuity?
This financial insurance contract can grow in value and provide constant income over an extended time period. They are good for growing your retirement, saving for your children’s schooling, setting up a trust fund, or bequeathing money to loved ones. Texas Department of Insurance regulates annuities and keeps an update list of companies and agents that are allowed to sell them in the state.
Three Kinds of Annuities:
Variable Annuities: Higher risk than fixed annuities, variable annuities rely on the stock market’s performance. They usually invest in different financial instruments, including money market funds, equity indexes, mutual funds, and government securities. These annuities let buyers decide how to distribute their accumulated value within the contract’s selected investments.
This kind of annuity doesn’t come with any guarantee of earnings and you can lose your original investment. Because variable annuities rely so much on the stock market, the Securities and Exchange Commission considers them securities.
Fixed Annuities: The most conservative type of annuity. They make earnings at an annually set current interest rate. Although the rate can change, a guaranteed minimum rate must be established. These annuity contracts usually invest in non-stock market, conservative investments. Buyers usually don’t have any say in how the funds are managed.
Equity-Indexed Annuities: EIA’s have traits that can be found in both variable annuities and fixed annuities. They pose a greater risk than fixed annuities and are less risky than variable annuities. Their returns are affected by changes in money, bond, and stock markets, and they come with a guaranteed minimum interest rate.
It is important to remember that annuities are not the best investment for everyone-especially if your financial goals are in the short-term. Your agent should apprise you of any risks and make sure that if you do choose to buy annuities, that they are the right choice for you.
Related Web Resources:
Understanding Annuities, Texas Department of Insurance
SEC Tips for Preventing Annuities Fraud, SEC.gov Continue reading