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Benefits of the managed investment portfolio:

  1. The insurance company fixes the rate of return at the purchase or start date of the annuity. That rate is currently lower than what is available in the market, and is commonly lower than the market, as the difference between the two rates is profit to the insurance company.
  2. Managed investment portfolios are governed by the Securities Act of 1933 which prohibits deceit and misrepresentation in the sale of securities, whereas annuities are exempt from this law protecting investors.
  3. Investment portfolios outperform annuities even though they are both calculated for comparison purposes with the same time intervals and starting amounts. Since the investment portfolio creates more income on a monthly basis than the annuity, this enhances the compounding effect on the total value of the investment portfolio. Therefore, the investment portfolio significantly outperforms the annuity because of compounding interest on an already higher rate of return.
  4. The investment portfolio can reinvest its capital when interest rates increase or as inflation increases, thereby providing even greater income to the investor and protecting the purchasing power of the investor.
  5. The capital in the investment portfolio is always available to the client, whereas the capital in the annuity is unavailable.
  6. The investment portfolio is a dynamic instrument. It is always under the control of the client and can, therefore, take advantage of favorable changing market conditions or unforeseen contingencies which may arise during the lifetime of the client.
  7. Investments in equities protect the purchasing power of the principal by allowing the principal and the dividend to increase.
  8. All of the investments in the investment portfolio have a higher degree of security than the annuity, as they are U.S. Government or government agency securities which in many cases also carry third party insurance to further guarantee any government agency default. On the other hand, the insurance companies’ statement of guarantee is solely based on the integrity of the individual company where today all are rated below the coveted AAA rating.

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