Displaying items by tag: fixed index annuities

(New York)

One of the best ways to use annuities is in so-called “annuities ladders”. MYGAs are commonly used in this way with the goal of maximizing returns rates, but one good strategy involves mixing MYGAs with a fixed index annuity. A typical example would be to invest a total of $400,000 this way: $100k into a 3-year MYGA, $100k in a 5-year MYGA, $100k into a 7-year MYGA, and $100k into a 10-year fixed index annuity. MYGAs have contractually protected yields, and the hope is that the FIA will yield a bit better than comparative CDs. Both products fully protect principal.

FINSUM: This is a sound strategy for trying to maximize yield while minimizing risk since yields and principal are mostly locked in.

(New York)

The market is currently in a rough patch. Even with yesterday’s big rally, the near-term prognosis for stocks could be quite bearish. That said, one product that would clearly benefit from a bear market is fixed index annuities. Because they are designed for principal protection (with limited upside), they tend to do very well during down markets, with clients showing ample demand. They are also not overly vulnerable to the Fed cutting rates, so taken altogether, they may be a perfect product for this market.

FINSUM: It seems like a good time for fixed index annuities, and we suspect clients will be showing good demand for the product given widespread anxiety.

(New York)

A new report shows that fixed index annuities sales have been surging. FIAs saw sales jump 57% in 2019, and there appear to be two reasons why. Firstly, the defeat of the DOL’s fiduciary rule completely reopened the market to a product that had been in serious trouble in the period leading up to the rule. Additionally, due to de-risking, variable annuities have become less attractive, and more money has been moving into fixed index annuities, which also offer higher rates than fixed annuities. Generally speaking, “Broker-dealers have embraced the solution as products become more transparent and consumer-friendly”, says Cerulli Associates.

FINSUM: The whole sales process for FIAs has really cleaned up its act and the marketing materials and structures are more accessible now. We expect this market to keep rising.

(New York)

Very high stock market prices and the continual threat of major downturn has sent fixed index annuity sales surging lately. Fixed Index Annuity sales accounted for 57% of all annuities sales in 2019 and amounted to $74 bn. “The high number of fixed-index annuity sales are a response to investors observing that the market continues to go up and this is a strategy to put a safety net under their portfolio if the market fails”, says one advisor in Pittsburgh. Fixed Index Annuities guarantee your principal while still offering limited upside, so they present a compelling case for people worried about a big downturn who need the peace of mind of principal protection and a steady income stream.

FINSUM: This is a perfect market for FIAs because of sky high prices and falling bond yields (which sap income). Just make sure you completely understand the contracts.

(New York)

Fixed Index Annuities have suffered from some bad selling practices over the years, and resultantly, bad publicity. However, they can serve some very important roles in a portfolio. There are a few things to remember about them. Firstly, they were designed to compete with CD-like returns while giving complete principal protection. Don’t think of them as a market growth product, they are a life insurance product. Additionally, they are a very good vehicle for income rider guarantees, or contractually agreed guaranteed income. This latter point is especially relevant given that 10,000 Baby Boomers are reaching retirement age every day and we live in a near pension-less world.

FINSUM: When carefully considered and utilized, FIAs can be excellent products that provide steady income and peace of mind.