When it comes to advisor compensation, what exactly do investors end up getting for their money…. and how much of their future retirement income must they ultimately give up? Typically, fiduciary financial advisors use their objective expertise for determining the proper allocation of clients’ assets, as well as for identifying promising and cost-effective investment opportunities.
But even so, are financial advisors today doing enough to help their clients with navigating turbulent market waters so that they can one day convert their savings into a livable income stream in retirement?
The answer to that is, it depends.
If you assume that an advisor charges roughly 1% for portfolio management, and the investor gets hit with another 2% or so for inflation, that 4.9% average annualized return going forward can be quickly whittled down to less than 2%.
Worse yet, if mutual funds make up a significant portion of an investor’s overall portfolio, the annual 12b-1 fees can eat away at return even more. Even a conservative figure, when accounting for transaction fees, can ratchet down an investor’s average annualized return to less than 1.5%.
Comparing that figure to a ten-year CD today with a guaranteed annual return of roughly 3% – even when considering the impact of inflation – doesn’t make the certificate of deposit seem all that bad anymore…and the investor can likely sleep much better at night knowing that the CD won’t plummet in value unexpectedly due to a market “correction”.
So, what are your other alternatives when it comes to keeping principal safe while also vying for a higher-than-average annual return?
One option could be a fixed index annuity.
Why Fixed Index Annuities Can Make Sense in Any Market Environment
Over the past couple of decades, the fixed index annuity has catapulted in popularity with investors who are seeking a better than average return on their money, without having to watch their portfolio value drop by 10% or 15% in a downward moving market.
That’s because fixed index annuities provide the opportunity to earn a return that is based on an underlying market index like the S&P 500. When the index performs well, the account is credited with a positive return – typically up to a maximum, or cap.
But, if the market tanks and brings the index down with it, the worst an investor can do during that time period is 0%. How’s that for providing the best of both worlds?
Is a Fixed Index Annuity Right for You?
While fixed index annuities can certainly offer a long list of enticing benefits, these financial vehicles aren’t right for everyone. And, because all fixed index annuities are not exactly the same, it can take a bit of research to determine which one will get you the closest to your short- and long-term objectives.
That’s where Annuity Gator comes in.
At Annuity Gator, we comprise a group of seasoned annuity pros who spend time researching and reviewing annuities. These are posted in our Annuity Review Database on our website. So, you can spend as much time as you want going over the in-depth details on specific annuities that are offered in the marketplace.
If you need more assistance, have a question, or want to compare two or more annuities, feel free to contact us. We’ll be happy to walk you through how different types of annuities work, and why they may or may not be the best option for you.
We can be reached directly, toll-free, at (888) 440-2468. Or, you can contact us via email through our secure online contact form to set up a time to chat with one of our annuity research specialists.