Are Fixed Indexed Annuities a Good Investment?
If you have this question, you are not alone. Look no further, let me explain whether fixed indexed annuities are a good investment or not.
Perspective will tell you whether fixed indexed annuities are a good investment. There are so many people out there trying to tell you what you should or should not like and I say it’s up to you. Anyone who doesn’t sell indexed annuities hates them so you pretty much have to take everything with a grain of salt.
Educate yourself and make up your own mind. There are plenty of people who own indexed annuities that really like them. You may be one of them and you may not.
Understanding the Available Investments
First of all, it’s important to understand the spectrum of available investments for retirement. It’s not as broad as many people think. Are you interested in a safe asset, or are you willing to take some risk?
Most people in retirement have become more conservative with investments and it’s foolish for anyone to have all assets in risky investments. Fixed indexed annuities are in a special place for people who want to protect assets but retain some healthy growth potential.
The Safe Side
On the safe side of things, alternatives are limited to cash, bank accounts, CDs, and fixed annuities. A fixed indexed annuity stands at the top of the pile because it is also guaranteed against loss but has the greatest growth potential.
The Risky Side
On the risky side of the equation, you’ll get bonds, variable annuities, mutual funds, and stocks with individual stocks being the riskiest asset to hold. Whether safe or risky assets, that’s a complete list of the options you have.
Newsletter February 21, 2021: Where do Indexed Annuities Fit?
Fixed indexed annuities also come with several other benefits that work well for retirees. It isn’t just about safety vs. risk, financial products need to accomplish goals. It’s helpful to look at indexed annuities in terms of the five keys to retirement- guaranteed income, market volatility, inflation, control of your money, and legacy. Those five keys give a retiree all he or she would need to create any type of retirement plan desired.
- Guaranteed Income – Yes, indexed annuities have provisions and even additional riders that can provide guaranteed lifetime income. Plus, they can be used without an additional rider and free withdrawals can be used to build an income plan or simply provide for discretionary spending and even portfolio rebalancing.
- Market Volatility – This one goes without saying because the contracts are protected from loss. You will not lose money in a fixed indexed annuity. The enhanced growth over and above other safe assets makes it an attractive alternative to stock market risk.
- Inflation – The best protection against inflation is to grow your money. You can’t do that in retirement without accepting risk. Too much risk and you are in danger of not being able to sustain your desired standard of living. With a solid protection component in your portfolio, you will be free to accept risk with other assets and the growth needed to plan for inflation.
- Control of Your Money – Fixed indexed annuities can be used without fees if chosen so that money always stays within your control. Fees have a dramatically negative effect on portfolio performance that results in less output over time. A portfolio without fees will grow better and provide the opportunity to make changes to a retirement plan as needed.
- Legacy – Lower fees and better performance in a portfolio will most certainly lead to an increasing net worth throughout retirement. This gives you a better chance of leaving a sizeable legacy if that is one of your goals. If it’s not then you can just spend more money.
So, are Fixed Indexed Annuities a Good Investment?
Yes, fixed indexed annuities are a good investment. Whether you use one will come down to personal preference and risk tolerance but the presence of one in a portfolio brings far too many benefits to be ignored. Regardless of what anyone else says, it’s well worth your while to see how an indexed annuity might benefit your portfolio.