Although annuities have been around since the Roman Empire, these financial vehicles have come to the forefront of retirement planning over the past few decades – particularly as more employers do away with their defined benefit pension plans. But, what do the experts say about annuities?
These days, as insurance companies add more “bells and whistles” to their annuity products, though, it has become more difficult to determine whether or not an annuity will fit in with your financial goals – and if so, which annuity type may be the best.
One type of annuity that has received high marks from some of the top financial experts and organizations is the fixed index annuity, or FIA…and it’s easy to see why. A fixed index annuity can essentially provide you with the “best of all worlds” – including the opportunity for growth, protection of principal, and guaranteed lifetime income.
The return on fixed index annuities is based on the performance of an underlying market index, such as the S&P 500. When the index performs well in a given year, the annuity account will be credited with a positive return – oftentimes up to a set maximum, or “cap.”
But, if the underlying index performs poorly in a given year, the annuity will not be credited with a loss. Rather, it will simply be credited with a 0% for that period. So, even if the index falls by 10% or 20%, your principal will still be protected.
As with other types of annuities, the funds in the FIA account are allowed to grow on a tax-deferred basis. This means that no tax is due on the gain each year, but rather at the time of withdrawal.
In addition, fixed index annuities also offer a choice of different income payout options – which includes lifetime income that is paid for the remainder of your life (no matter how long that may be).
With that in mind, several top financial experts and organizations have weighed in on fixed index annuities:
Tony Robbins, Author and Coach, states, “In today’s economic environment, where returns for ‘safe capital’ are minuscule, fixed indexed annuities can be a great alternative to other ‘safer money’ financial instruments.”
Suze Orman, Author and TV Host, has said, “If you don’t want to take risk but still want to play the stock market, a good index annuity might be right for you.”
The Wharton Business School at the University of Pennsylvania also believes that fixed index annuities are a positive when it comes to growth and income. This entity states the following: “Indexed annuities outperform the S&P 500 67% of the time and a 50/50 mix (of stocks and bonds) 79% of the time over any 5-year period.”
Likewise, Kiplinger’s Personal Finance has been quoted in the positive as it pertains to fixed index annuities, including its statement, “When it comes to choices you control, only an annuity guarantees that your income – or a portion of your income – will continue no matter how long you live.”
In a recent Ibbotson report, Roger Ibbotson himself wrote, “…uncapped Fixed Indexed Annuities which, if structured properly, can help control financial market risk, mitigate longevity risk, and may outperform bonds over time.” Ibbotson concludes that, “…a generic FIA using a large cap equity index in simulation has bond-like risk but with returns tied to positive movements in equities, allowing for equity upside participation. For these reasons, an FIA may be an attractive alternative to consider.”
Is an Annuity Right for You?
Most financial professionals would agree that there is no such thing as a one-size-fits-all strategy that is right for everyone across the board. So, even if a fixed index annuity is the ideal fit for your neighbor, your co-worker, or your best friend, it might not be the best alternative for you.
That’s why it is imperative that you have a good understanding of how annuities work, and what you can anticipate if you add one (or more than one) to your portfolio. And that’s where the Annuity Gator can help!
Our focus at Annuity Gator is on providing the most comprehensive and non-biased information about annuities online so that consumers can determine whether an annuity is the right fit for their specific short- and long-term financial objectives.
In our annuity review database, we’ll show you the inner workings of all different types of annuities, including where you can find more details on any charges, fees, and possible surrender penalties.
So, regardless of what the experts say, if you have any questions about annuities and how they may (or may not) fit in with YOUR financial goals, feel free to contact us directly at (888) 440-2468, or through our secure online contact form today.