Recently Advisor Perspectives quoted me in "Concerns About Annuity Issuer Failures Are Misguided," a must-read for anyone that owns an annuity or is considering an annuity. The article published on January 4, 2021 and was co-written by Ben Mattlin (who sourced me) and David Lau. Annuity Perspectives is the leading interactive publisher for Registered Investment Advisors (RIAs), wealth managers, and financial advisors.
Here’s the deal. With all consumer/commercial annuities, the contractual guarantee is backed by the issuing carrier. There is no FDIC coverage with annuities, but each state has a State Guaranty Fund with limited coverage. It's best to base your annuity buying decision on the claims-paying ability of the carrier.
Additionally, the annuity industry has historically self-policed itself to ensure that these "confidence products" are not damaged in the minds of the consumer. With over 10,000 baby boomers reaching the age of 65 every day, the annuity industry wants to be in front of this demographic tidal wave. As pointed out in the article, when some carriers have gotten into trouble financially, other larger carriers swoop in and absorb all of the contractual guarantees in place. I call this the "Annuity Mafia" because the large carriers will protect the golden annuity goose at all costs.
Annuity companies aren't smarter than banks. They are just more regulated/limited/hand-cuffed with where they can invest the money. It's really that simple.
Being known as the "Walking Middle Finger of Annuity Truth," I like working with Ben on his articles because he is just like me….brutally factual. He’s not afraid to tackle the tough issues even if the industry isn’t always on board with peeling back that “annuity onion.” Free advice: As a consumer, if you see Ben Mattlin’s name at the top of the article, ya might want to read it.