by Kyle S. Plotkin
Investment Advisor Representative
[email protected]
As Peter discussed above, the volatility of the stock market has been a major concern for many clients in recent weeks and months. With the market fluctuating, it’s hard to say: is the roller coaster heading up or down? The truth is, no one knows for sure. However, many of my clients are increasingly worried about risk and looking for ways to protect their nest egg.
While options like CDs, bonds, and treasuries provide stability, the potential returns are often limited to current interest rates set by the Fed. Fortunately, there’s a product that allows for higher returns in favorable market conditions while still protecting against losses when the market dips. I’m talking about Fixed Indexed Annuities (FIAs), a financial tool offered by life insurance companies that combines the safety of CDs with the potential for greater returns.
How do they work? It’s pretty simple. FIAs are tied to a market index, usually the S&P 500, and run on one-year interest crediting cycles. If the index increases during the year, you’ll earn interest equal to that percentage gain, up to a specified cap. Currently, many highly rated insurers offer caps in the 8-10% range. If the market goes down, your money incurs no loss. FIAs are a great way to take some risk off the table while still capturing gains when the market rises.
FIAs are especially valuable in the year following a market loss. While investments in the market might struggle to regain previous losses, the money in an FIA has experienced no loss and can begin growing again immediately in the next cycle.
The caps on these annuities have reached their highest levels in recent years, which continues today. That means that you can potentially earn 8-10% in strong market years without worrying about the roller coaster falling when stocks go down. Indexed annuities have grown significantly in popularity, with total FIA purchases nationwide increasing by more than 20% in each of the past two years. Here at FRS, we’ve been using FIAs for more than two decades to help our clients both protect and grow their nest eggs at the same time.
If concerns about the market are on your mind, an indexed annuity might be a good solution. Give us a call at 215-657-9200 to learn more and see how a Fixed Indexed Annuity can help you reach your financial goals.