Fixed-Index Annuities Offer Retirement Solutions

Persistent Low Interest Rates and Demographics Drive the Demand

Retirees accustomed to a lifetime of asset accumulation are finding growth opportunities few and far between in what may be the second longest stage of their lives. Efforts to grow and even preserve their portfolios have been met by persistent headwinds in recent years and don’t show signs of changing soon.

Low interest rates have persisted for years, compromising accumulation that in the past fueled compounding. Formerly strong 6% returns and frequent renewal terms have given way to puny 2.25% annual returns on five-year lockdown CD’s.

Risk-aversion resulting from stock market volatility in five separate years since 2001 has kept money on the sidelines, often in money market funds that offer security but mere basis-point interest that is subject to taxation.

Gaining traction among financially conservative Baby Boomers, who are retiring at a rate of 10,000 per day, and seniors with near-expected longevities into their 80s, are fixed index annuities.

Provided and backed by insurance companies, fixed index annuities are lauded by industry veterans for these attributes: 

• Preservation of principal
• Account growth due to market-indexed gains
• Protection against loss of gains, even in negative-return years
• Availability of an income rider to pay benefits for the holder’s lifetime, or, the option to annuitize the account without a rider

 Though accounts are not credited for earned dividends, clients can find satisfaction from the stability of insurance-backed providers. Additionally, guaranteed lifetime income can pick up where exhausted resources and a depleted sequence of returns leaves off. 

Statistics provided by the LIMRA Secured Retirement Institute verify the popularity of indexed annuity sales. For the period ended September 30, 2015, quarterly sales increased 22% to 14.3 billion, with year-to-date sales up 7% to $38.4 billion.

Despite dismal interest rates and fears of market uncertainty, retirees and aging investors can find safe-money havens in fixed index annuities that are consistent with a generally accepted approach that is conservative and age-appropriate.