Annuities: The Big Risk in Today's Economy?

We are now approaching close to 70 years following the first Great Depression in this wonderful country. It certainly has been quite a ride and there is no question that this country has prospered tremendously since then. And many people still believe that we are soon going to recover. However, I am not so sure it's going to be that quick.

We are currently facing a breakdown of the credit system. It started with sub-prime mortgages but has recently spread to many other facets of this economy. I mean, General Motors which is considered the bell weather of bell weathers, is having issues these days. I can tell you this, most people never saw it coming. And the problem is, you almost never do. If you don't believe me, look how many people were fooled by a company named Enron.

So will your insurance company follow? Are your annuities at risk? That is a question at least worth pondering. Now I know that by writing this article, I will get many angry comments about how insurance companies are the safest places to have your money with but I wouldn't be so sure. Now, I am not saying there is anything wrong and that insurance companies aren't safe. I am simply stating that sometimes you have to question the unquestionable.

So what does that mean? Does that mean you should bail out of your annuities? What I want to do is to open your eyes to what this economy could bring. If I asked you 10 years ago whether or not you thought the auto, airline, and technology sectors would be suffering tremendously, would you have answered yes? I highly doubt it. In 1998 tech was flying high along with this stable and exploding economy. Now 10 short years later, here we are talking about recession and possibly even depression.

Annuities can be safe havens. And insurance companies can be the way to mitigate the risk in your investments. But I encourage you to question what you may not question. My opinion is that we are heading towards a major recession if not a depression. It is now 2008 and I believe in 2 to 4 years from now, many companies you never expected to fail will fail. I also suspect that there may be some major changes in this economy that one may never expect.

In addition to this, we are in an unstable rate environment. While some economists are predicting inflationary recession others are predicting a deflationary recession. Only time will tell which way it will go. The worst thing you can do is to be stuck with something making 3 or 4% while inflation is running wild. And on the contrary, it would be foolish not to take advantage of rates now if one believes deflation is on the horizon.

The bottom line is that we are at a very challenging time in our economy. It is best that one proceeds with prudence and caution. It is well worth it to do a great deal of homework before proceeding with any investment let alone with annuities. Furthermore, one should question the unquestionable and not take anything for granted in this economy. Your future depends on the decisions you make today.

One final point is please don't take this as a ploy to scare you. It's just that we must be aware and invest with our eyes open. I personally have friends who were invested in Enron. They never thought twice that they would lose all of their money but that unfortunately, was not the case for them. Don't let your annuities be the same situation.

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