Jess Guyer

After its worst six-month performance in 50 years, the stock market has investors wondering whether it’s over or is the worst yet to come. Markets like these trigger a massive flight to safety, with investors finding solace in cash savings or CDs, hoping to ease back into the market when the all-clear signal sounds. But when will that happen, and what is it costing them in the meantime?

Fixed Indexed Annuities Offer a Viable Alternative

What’s the alternative? For investors with retirement in their sights, it’s becoming ever more critical to preserve assets while still participating in the growth of the market. After a nearly 500% return in the stock market since 2009, advisors may want to consider having their clients take some profits and move them into a fixed indexed annuity (FIA).

Here are seven good reasons to recommend a fixed indexed annuity for your clients:

1. Retirement investors can lock in their profits from the last decade and preserve them in an FIA that won’t lose any value.
2. An FIA allows investors to participate in a portion of the stock market’s gains with no downside risk.
3. An FIA can be an ideal replacement for fixed-income investments that have been performing poorly in a rising interest rate environment.
4. To ensure positive returns in down market years, investors can allocate funds to a guaranteed account currently yielding up to 4%.
5. Some FIAs offer flexible premiums so investors can continuously take profits as they occur and preserve them.
6. FIAs offer several critical advantages, such as tax-deferral, lifetime income options, probate and social security tax avoidance, and death benefits.
7. With health care costs rising in retirement, an FIA can be an ideal sinking fund to cover large medical and long-term care expenses.

A Fixed Index Annuity as Part of a Sound Investment Strategy

A fixed indexed annuity shouldn’t be a substitute for a well-constructed, diversified portfolio of stocks, bonds, and other assets. But, with its unique properties and advantages, it could be considered as part of an overall long-term investment strategy, especially when capital preservation and lifetime income sufficiency are priorities.

While they don’t offer the upside potential of equities or equity funds, FIAs generally perform better than CDs and Treasuries, which can keep you in the game during high inflation. With the advantages of tax deferral and lifetime income options, FIAs also offer more planning opportunities.

With increasing market volatility and underperforming fixed-income investments, an FIA can play a vital role in a client’s asset allocation strategy. With FAIU as your partner working with all the top FIA carriers, we can help you match your clients’ investment objectives to the right product and lay out a simple presentation your clients can understand.

— By Ed Stone, LTC, DI & Annuity Specialist