I hear the same story all the time from my clients. I want the potential to grow my money fast, and I want the safety of knowing my money is also protected. Potentially high growth often draws them to the world of investments things like mutual funds, bonds, stocks, and variable annuities. At the same time safety pulls them back to savings accounts, money market and CD’s. The problem is each type of these investments has challenges of its own. We all know the market goes up and the market goes down. The potential of receiving high growth comes with risk of market downturn and annual fees. At the same time safety concerns pulls them back to saving accounts, money market, and bank CDS. These types of investments can be safe but in today’s climate with the low interest rate it s almost impossible for your money to grow.
This tug of war can be hard to win.
Can you see the tug of war between potential of growth and safety of principal? I see it all the time. Fixed indexed annuities (FIA) can help you with this financial tug of war. A FIA can benefit by providing you the potential to grow your money without the risk normally associated with investments like the safety and protection of savings accounts, money market and CDS. The combined benefits of a FIA give you the potential to exceed traditional fixed interest rates without exposing your principal or part of your gain to market risk and fees.
Let me explain how these performance principles apply in different market conditions. Because of the way interest is credited in FIA in years of growth you get to participate in the gains. Now nobody likes a year of loss, and the great thing about a FIA is you do not participate in any period of market losses. In other words, you get to completely sit the bad years out.
As the market continues to drive downward the value in your FIA both your principle and gains are locked in and guaranteed during that period of time. This will create a tremendous value when the market rebounds and as the market starts to go up again you will have the opportunity to participate in the gains. The major advantage is you’re starting from a higher starting point. Having not lost any value of your principle and previous gains were locked in and protected. If the market does fall again what do you think happens? That is right your gains are locked in and can never be taken from you.
All of your gains also grow tax deferred. There is also a minimum guarantee if you remain in the contract you will receive more than what you put in the policy regardless of market condition. I think that this shows that a Fixed Index Annuity is a balanced strategy for some of the money in your portfolio.
You may also elect to receive guaranteed income that you cannot outlive. Would you like the potential to exceed traditional fixed rates? Can you benefit from tax deferral? Would you like to access your money when needed through penalty free withdrawals? Would you like to keep your principal and earning from risk? Would you like the option to later convert your retirement funds into guaranteed income that you could never outlive? Stop the tug of war and balance your portfolio with a FIA.