Displaying items by tag: fixed index annuities

Thursday, 01 April 2021 17:51

How Annuities Can Boost Returns

(New York)

Interest rates are still very low. So low that retirees are being starved of income. With that in mind, some are employing annuities in unique ways to help increase interest income. In particular, one strategy being employed for older investors who want to boost income in the “safety” portion of their portfolio is to use multi-year guaranteed annuities (MYGAs) to boost interest income. MYGAs typically pay well in excess of what CDs and other cash management products pay. This is because the insurer behind the annuity can invest the capital in a diversified portfolio, including longer-term holdings. MYGAs are not FDIC insured like CDs, but they do come with contractual guarantees and are often from companies with great credit ratings.


FINSUM: This is a very good strategy for certain investors who can afford to tie up capital in an annuity and are looking for ultra-safe but above-market interest income relative to similar instruments.

Published in Wealth Management
Thursday, 11 March 2021 19:03

Sales of This Annuity are Booming

(New York)

Annuities have been doing very well ever since the pandemic began, and the reasons make total sense: high volatility and ultra-low rates which have rendered bonds a very poor source for retirement income. With that in mind, it is no wonder that protection-focused annuities have been seeing heightened sales. 2020 actually saw a significantly higher volume of protection-focused annuities sales than 2019, despite the fact that overall wealth and liquidity fell considerably at the start of the pandemic. The big driver of demand was the huge fall stock indexes experienced early in the pandemic.


FINSUM: This makes a lot of sense as a huge percentage of Americans are approaching retirement and 2020’s market gave them a terrible fright. We expect this trend to continue.

Published in Wealth Management

(New York)

Most investors don’t fully understand the differences and benefits between fixed annuities, variable annuities, and fixed index annuities, so it is only natural that most clients would not even begin to understand deferred annuities and their benefits. Deferred annuities work just like other types of annuities except they explicitly defer any payouts for a set number of years. It is essentially a lump sum that gets invested, with no planned withdrawals for, say, 20 years. In many ways that makes them like an IRA. These can be very useful for clients who have are conservative in their outlook, have a nest egg to buy an annuity, and don’t need income right away.


FINSUM: In our view this is a perfect product for Millennials and Gen X who are 15 years or more from retirement. It is like a self-funded IRA and completely fits with Millennials’ bearish view of markets and the economy. It may also be a good choice for clients who tend to overspend, as this can do a good job protecting them from themselves.

Published in Wealth Management

(New York)

With interest rates so low there has been increasing interest in the role that annuities can play for those near or entering retirement. Bonds just aren’t playing the dual roles of safe haven and income source that they once did, and annuities are a naturally inheritor of that role for the foreseeable future. However, one thing that many are not clear about is how well fixed and variable annuities can work together. While fixed annuities offer guaranteed income, they are susceptible to inflation. Accordingly, many retirees might also want to have some upside that will allow their payouts to move higher. Enter variable annuities, which can offer enhanced income in up markets (but do risk lower payments in down markets).


FINSUM: Fixed and variable annuities work well as a pair. The portion invested in fixed offers guaranteed income, while the variable portion offers upside potential.

Published in Wealth Management

(New York)

Here is a non-sensical but fully logical sentence for you: bonds just aren’t “bonds” right now. What we mean is that bonds simply aren’t fulfilling their long-understood role any longer. They yield very little and have a great deal of risk—both the opposite of their traditional role. So where can advisors turn? One increasingly interesting area is annuities, and fixed index annuities in particular. They offer the downside protection investors need, and upside participation everyone wants. Principal is never put at risk to the market, but interest from the initial purchase is used to participate in upside. In other words, you have principal protection with some upside potential—just like bonds have traditionally been used.


FINSUM: Fixed index annuities seem to be a very good alternative to bonds in the current environment.

Published in Wealth Management
Page 2 of 6

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…