Considering A Fixed Index Annuity For Retirement?
For a long while, annuities had gotten a bit of a bad name as the current low interest rate environment drove returns on annuities, and other low yield investments such as bonds, down significantly. In fact, it made no sense whatsoever to invest your money into an investment that cannot keep up with inflation. However, with the discussion of the cessation of quantitative easing, we have already seen interest rates climbing, which bodes well for annuities as an investment.
Pros And Cons For Annuities As An Investment
Pros: If you’re looking for guaranteed income that you can’t outlive, and income not connected to market performance, this may be the investment of choice for you. For many retirees, the possibility of guaranteed low-risk income, is far more appealing than throwing your assets to the whims of the stock market and risking losing it all at 60, 70 or worse. There is something very comforting in knowing that, while you may be tying up a large portion of your assets to purchase the annuity, you will always have money coming in no matter how old you live once the annuity has been purchased. With an annuity there is no risk of outliving your retirement income.
Cons: The big negative with a fixed index annuity is that there is very little flexibility once it has been purchased. It can be a little unnerving to make such a big purchase knowing it could be difficult to later change anything with your investment should your needs change. For instance, if you were to die prematurely, depending on the annuity, your family may or may not be able to get that in inheritance money. Different annuity packages have different rules that apply and those rules are pretty firm. Additionally, annuities offer less risk, but they also typically have a lower return on investment than stock market investments. You have to weigh your risk appetite to truly determine what you are most comfortable with.
Ask Questions When Purchasing An Annuity
Before you lock yourself into an annuity purchase, it’s important to ask many questions regarding the company, the rules that imply, the tax benefits etc. Go in with eyes wide open to try to reduce any dissatisfaction you may have with your annuity purchase. It would also be advisable to discuss such a large purchase with a wealth advisor to make sure that you’re on the right track.
For more information on annuities as an investment, and on where they stand in today’s investment environment, speak to a Redhawk Wealth Advisor near you today.