It’s been more than a decade since the worst financial crisis since the Great Depression wreaked havoc on the stock market, as well as on the entire U.S. economy. Millions of people lost their jobs, their homes – or both. And because of that, there are countless investors who have still not gotten back to “even” in terms of their income, their savings, and their overall net worth.
But just like any other type of harrowing experience, those who will fare the best going forward can learn from the past and in turn, make sure that they aren’t blindsided the next time around.
A Safe Haven for Principal – Without Having to Settle for Minuscule Returns
Depending on where you are in your retirement planning journey right now, it is likely that some of your top priorities include garnering as much growth as possible, while at the same time keeping your savings, well, safe!
Unfortunately, with most financial tools, you have to settle for just one or the other. For instance, stocks and growth mutual funds can provide you with the opportunity to earn stellar returns.
But in the event of a market meltdown – or even just a slight hiccup – you could also lose everything you put in. And at that point, you are literally back to square one – without much time to make up for all of your losses.
On the other hand, CDs and money market accounts are a no lose option – at least on paper. So, you won’t technically see any losses on your statement with these financial vehicles. But you are essentially still losing when you go this route.
That’s because savings and investment alternatives that offer safety and security will typically only provide minuscule returns – returns that don’t even keep pace with rising inflation. With that in mind, “safe” investments like CDs can actually put you in a bad position down the road as it pertains to keeping your purchasing power on track.
But there is a better way.
While many investors may be familiar with fixed and variable annuities, an alternative that isn’t so well known is the fixed index annuity or FIA. These financial vehicles provide the opportunity to earn a return that is based on the performance of an underlying market index, such as the S&P 500.
During periods of positive activity, the return is posted, typically up to a set cap, or maximum. But during times of negative index performance, there are no losses posted to the annuity’s account, but rather just a 0%.
In this case, imagine being directly invested in an index that tanks – and then dreading the thought of seeing your next financial statement.
Then, imagine the same market performance during the same period of time, but with no loss posted to your account.
Is an Annuity the Solution or Just Another Financial Problem to Avoid?
While the fixed index annuity might sound like the best of all worlds – no matter what is happening in the market, or even in the economy overall – these financial vehicles aren’t right for everyone. However, they also aren’t wrong for everyone either.
There are some financial “gurus” who will tell you to avoid annuities at all costs. But giving this type of advice across the board, and without even considering an investor’s specific needs and goals, can be dangerous advice – advice that could rob some of the safety of their principal, as well as the assurance of an ongoing, guaranteed income down the road.
If you’d like to “test drive” a fixed index annuity, based on your specific financial parameters, give us a call. At Annuity Gator, our number one goal is to educate consumers about annuities, and from there, help them to determine whether or not an annuity is even right for them.