In general, the tax-free rates of return on annuities issued by top-rated life insurance companies are 0.5% – 1% better than comparable fixed income investments. The GSS product that incorporates tax-free returns from equity investments can produce a greater spread over traditional fixed income returns. The table below illustrates the dramatic superiority in the rates of return of tax-free annuities over all time periods.
| LATEST RATES US TREASURY | |
|---|---|
| 5 Years | 2.45% |
| 10 Years | 4.08% |
| MUNICIPAL | |
| 5 year AA rated | 2.45% |
| 10 year AA rated | 2.52% |
| 20+ year AA rated | 3.30% |
| CORPORATE | |
| 5 year AA rated | 4.50% |
| 10 year AA rated | 5.00% |
| 20+ year AA rated | 5.15% |
| Money Management 0.75% | Income Taxes 25.00% | Net Returns From Bond | Comparable Annuity Return |
|---|---|---|---|
| -0.75% | -0.61% | 1.09% | 4.2% |
| -0.75% | -1.02% | 2.31% | 4.5% |
| MUNICIPAL | |||
| -0.75% | 1.70% | 4.2% | |
| -0.75% | 1.77% | 4.5% | |
| -0.75% | 2.55% | 4.7% | |
| CORPORATE | |||
| -0.75% | -1.13% | 2.63% | 4.2% |
| -0.75% | -1.25% | 3.00% | 4.5% |
| -0.75% | -1.29% | 3.11% | 4.7% |
Some claimants and occasionally even their attorneys feel that interest rates might rise in the future allowing them to earn a higher return than offered by an annuity at the time of settlement. For the 30 years we have been in the business there has never been a swing in the fixed income markets for that strategy to succeed. Claimants who may have made that choice 5, 10, 15 or 20 years ago are still waiting, and they have forfeited a great deal of money. Indeed, it is likely the funds from their settlement have been dissipated.
