Displaying items by tag: fixed index annuities

(New York)

A lot of advisors and investors are looking at fixed annuities right now, especially fixed index annuities. Such products offer principal protection and lifetime income, both of which are in short supply given current market conditions. It is important to remember though, that FIAs were only built to beat CD returns by a small margin, they are not supposed to have huge upside. With that said, there are ways to maximize returns, such as using income riders. These are extra features which provide higher lifetime income payments are a future date of your choice. They need to be added when you buy the annuity, not later, and do have annual fees.

FINSUM: Income riders are most popular with fixed index annuities, but do show up in some variable annuities and SPIAs.

(New York)

One of the most commonly asked client questions about annuities is “what is the best age to buy one?” The answer, as advisors know, is that there isn’t one; it depends on your financial goals and circumstances. That said, there are a couple things to bear in mind. Firstly, those in their mid-40s or younger should almost certainly not consider annuities (outside of some variable annuities) because they have the time to take additional risk (and get the additional growth) of direct exposure to the market. On the other end, annuity availability for those 80 and older declines rapidly. Accordingly, depending on circumstances, the sweet spot is likely in that range.

FINSUM: Annuities seem to be best bought for what they guarantee, not what they might offer, as downside protection and income protection are truly the name of the game.

(New York)

Usually, down markets are a very good tailwind for fixed annuities. With losses mounting, the prospect of full principal protection is usually very appealing. However, something odd is happening across the market—insurers are pulling many products from the shelves. Unlike the empty shelves in your local grocery store, it is not because they are selling out, it is because insurers desperately need to reprice the products given the huge moves in interest rates and market prices, and they do not have enough capacity to do this on the fly.

FINSUM: From a buying perspective, this market is perfect for fixed index annuities. Advisors may find some very attractive offers for clients.

(New York)

Even advisors who use fixed index annuities frequently may not be aware that under the new SECURE Act, the products have gotten some preferential new tax treatment. In particular, clients can now rollover 401ks, 401bs, IRA, or pension payment into a fixed index annuity tax-free. This obviously comes in addition to the fact that FIAs are tax deferred to begin with.

FINSUM: This seems like a very useful addition to the FIA universe provided by the Secure Act. Advisors should be aware.

(New York)

Imagine retiring this month. The Dow’s recent bottom means it was 18%+ off its peak. That is a really rough time to be entering the late stages of a career or early stages of retirement. One option for those worried about protecting income is a fixed index annuity. The insurance product guarantees full principal and is designed to offer upside as well. The idea is to have their yields outperform the market, but at the same time offer full downside protection.

FINSUM: Fixed index annuities are probably going to see a big rise in popularity this year given how poorly the stock market is doing. Worth consideration.