Who Shouldn’t Buy a Fixed Indexed Annuity
Learn if you are among the people who shouldn’t buy a Fixed Indexed Annuity.
Maybe You Shouldn’t Buy a Fixed Indexed Annuity
That’s right. Maybe you shouldn’t buy a Fixed Index Annuity. If you are searching for annuities, there are lots of people who will try to tell you to buy a fixed indexed annuity, no matter if it’s right for you. But, fixed indexed annuities are not for all people or all situations.
Even if you are looking to protect assets or generate income, two of the things that fixed indexed annuities do best, there may be better options depending on your specific situation. I’m going to give you a list of situations where a fixed indexed annuity is not the right tool for the job. Use this and make up your mind before contacting a salesperson.
Table of Contents
- Maybe You Shouldn’t Buy a Fixed Indexed Annuity
- If Fixed Rate Annuities are just Fine, Don’t Buy
- You Find Fixed Indexed Annuities Hard to Understand
- Market Volatility does not Bother You
- Short-term Goals don’t Work with the Surrender Schedule
- You are Past the Age of 80
- You don’t Trust Sales People
- Still Waiting for Interest Rates to Rise
- Skeptical? You Shouldn’t Buy a Fixed Indexed Annuity
- Podcast Episode: Who Shouldn’t Buy A Fixed Indexed Annuity
If Fixed Rate Annuities are just Fine, Don’t Buy
Many people see fixed indexed annuities as being too complex. While there are only some slight differences with plain old fixed annuities, some find the differences too detailed. Fixed rate or multi-year guaranteed annuities are more simple and plenty of people are happy with a guaranteed yield. If you like the rates available and the simple nature of fixed rate annuities, then you shouldn’t buy a fixed indexed annuity.
You Find Fixed Indexed Annuities Hard to Understand
There are so many options with fixed indexed annuities that a lot of people get lost analyzing the various products. In this case, it’s time to take a step back, focus on personal financial goals, and look at how all products can help you meet those goals. Until you understand how each product can meet your needs, you should not buy a fixed indexed annuity.
Market Volatility does not Bother You
Often I meet people who don’t like the limitations on indexed annuity growth. Even if it comes without risk, yield potential does not meet expectations for some. This is a sentiment shared by people who think any downturns in the market will be short-lived. They think that money in an annuity will not create a desirable yield in a market rebound. If this is you and you don’t mind market risk then you shouldn’t buy a fixed indexed annuity.
Short-term Goals don’t Work with the Surrender Schedule
Market protection is always a valuable addition to a financial portfolio. Even short-term annuities are meant to solve long-term problems. All annuities are meant to balance, diversify, or distribute assets from a portfolio in retirement. If you have plans for a major purchase or alternative investment, you shouldn’t buy a fixed indexed annuity.
You are Past the Age of 80
This is just my personal opinion and I have sold some fixed indexed annuities to people past the age of 80. Most of the time that was for diversification purposes and the other times it was for guaranteed lifetime income. After the age of 80, you are typically better off buying an immediate annuity for income or a fixed annuity for accumulation. Skip the complexity and enjoy life with your family. Most people over the age of 80 should not buy a fixed indexed annuity.
You don’t Trust Sales People
No matter how many disclosures are made, some people just won’t trust a salesman. Large financial transactions are important and you should never do it if you start the whole thing with a negative attitude. This may seem silly but I’ve met a lot of people who do this and it never ends well. If you have issues trusting someone who will make money on the transaction then you should just skip it altogether. Go to a bank and buy a CD. Banks don’t make any money off of you. (sarcasm intended)
Still Waiting for Interest Rates to Rise
As good as things seem right now there are still those who are waiting for interest rates to get better. Since about 1990 rates have been falling and have only risen in 2018 and 2022. Waiting for rates to rise even further could mean that you’ll have to accept less if rates go the other way. If you are not satisfied with yield potential and think it could get better, you should not buy an indexed annuity.
Skeptical? You Shouldn’t Buy a Fixed Indexed Annuity
For those who are skeptical this is a pretty detailed list that will give you a good excuse if you don’t want to buy a Fixed Indexed Annuity. Fixed indexed annuities have been proven to enhance a portfolio in retirement but it doesn’t work for everyone. Confusion among products or goals that don’t align with investment options is all reason for avoiding a commitment to fixed indexed annuities. Regardless, plenty of people will still try to sell you one but stick with Annuity Straight Talk for the best recommendations.
All You Need to Know to Buy an Annuity
Podcast Episode: Who Shouldn’t Buy A Fixed Indexed Annuity
