Skip to main content

financial planners baltimore county

financial planners baltimore county

  • Home
  • Who We Are
  • What We Do
  • Our Owner
  • Affiliations
  • Resources 
    • Blog
    • News
    • Current Events
    • Free Brochure
    • Free Risk Analysis
    • Login
  • Contact

    You are here

  1. Home
  2. Blogs
  3. Will Retirement Investors Tolerate the Next Big Downturn? The Case for Fixed Indexed Annuities

Will Retirement Investors Tolerate the Next Big Downturn? The Case for Fixed Indexed Annuities

Submitted by Stark Strategic Capital Management, Inc. on November 28th, 2017
  • Google Plus One
  • Tweet Widget
  • Linkedin Share Button

No one can predict with any degree of certainty when the next market correction or bear market will occur, or how long it will last. What we do know is that, at eight years and counting, the current bull market has lasted twice as long as the average bull market. It’s safe to assume that investors, who are experienced in the ways of market cycles, have taken measures to prepare their portfolios for the likelihood of a market decline and renewed volatility. While that might ease their minds, it may not be enough to calm the nerves of those who are still reeling from the last market crash.

What Retirement Investors Really Want

Most retirees would rather not have to worry about their retirement assets losing value; but they also need to be able to generate returns that can at least keep pace with inflation. An ill-timed stock market decline can derail a retirement income plan and low-yielding vehicles can’t generate the income needed to support a comfortable lifestyle for 25 years or more. With their ability to shield their assets from stock market volatility while capturing a portion of stock market gains, indexed annuities may be the alternative retirees are looking for.

How Indexed Annuities Work

At its simplest, a fixed indexed annuity provides investors with the opportunity to generate higher yields based on stock market performance with downside protection. There are a lot of moving parts in a fixed indexed annuity, which is what enables it to achieve what no other investment can. Here’s a quick review of those parts:

Stock Market-Based Yields: The rate on a fixed indexed annuity is calculated as a percentage of the annual gain in the stock index, such as the S&P 500.

Capturing Market Gains: A portion of the stock index gain is credited to the account based on a participation rate. In a year when the stock index gains 15%, a contract with an 80% participation rate would credit 12% to the account.

Capping the Yield: Not all contracts would credit 12% to the investors’ accounts because they typically include a rate cap ranging from 4% to 15%. So, a 15% stock index gain might only translate to a 7% rate credit.

Eliminating the Downside: The portion of gains insurers retain in positive years is used to offset losses in negative years, which is how they still manage to credit a minimum rate even when the index declines.

Locking in Your Gains: Once a gain is credited to the account, it is locked in, which means the account will never decline in value.

What about Those Limited Returns?

One of the primary criticisms of fixed indexed annuities is their limits on returns. However, studies have shown that investors are willing to give up some upside for the possibility of limiting their downside. According to the Wheaton Financial Institution Center, “Indexed Annuity returns have been competitive with alternative portfolios of stocks and bonds and have limited downside risk associated with declining markets. And they also have achieved respectable returns in more robust equity markets.”

Financial planners are divided on the role or the effectiveness of fixed indexed annuities in portfolio planning. For some, it’s about the expenses typically associated with fixed annuities; but there are plenty of new products with low expenses. For others it is their illiquidity due to surrender charges; yet, investors do have free access to their funds up to 10% of their surrender value each year and 100% at the end of the surrender period. Contrast that with investors who feel locked in to their investments when stock prices suddenly decline, afraid to sell their investments at a loss. However, it is undeniable that the unique properties of fixed indexed annuities, even for a small portion of their retirement portfolio, can offer your clients something no other investment can – the peace-of-mind that comes with preserving their capital without sacrificing yield, which is priceless.

 

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2017 Advisor Websites.

Tags:
  • annuities, bear market, downturn, market correction, bull market

Recent Blog Posts

  • FinTech - What Apps You Should Know
  • How Political Climates Affect the Financial Market
  • Infographic: What's Your Risk Management Plan?

Archived Blog

  • December 2017 (2)
  • November 2017 (6)
  • May 2017 (4)
  • March 2017 (3)
  • February 2017 (4)
  • January 2017 (2)
  • December 2016 (4)
  • October 2016 (2)
  • September 2016 (6)
  • August 2016 (5)
  • July 2016 (5)
  • June 2016 (6)
  •  
  • 1 of 2
  • ››

Categories

  • annuities, bear market, downturn, market correction, bull market (1)
  • annuities, deferred annuity, immediate annuity, retirement, insurance, dividends, bonds, guaranteed income, (1)
  • annuity, deferred annuity, immediate annuity, index annuity, guaranteed, income stream, mortality, surrender, costs (1)
  • app, apps, stock market, mobile, investments, retired, retirement, (1)
  • apps, fintech, online banking, online investing, financial news, PC Mag (1)
  • asset allocation, asset location, 401(k), types of investments, stocks, bonds, real estate, hedge funds, commodities, currencies, investment returns, portfolio returns, portfolio, investment advisor (1)
  • asset, insurance, income, disability insurance, loss of income, income protection, disabled, disability (1)
  • Baby Boomer, retirement, life expectancy, inflation, Social Security, lifestyle, medical costs, income gap, stock market, strategy, investing, growth (1)
  • basics, emergency fund, life, disaster, family, death, insurance, life insurance, disability insurance, retirement, long term care insurance (1)
  • bear market, stock market, investments, retruns, risk, investing, discipline, patience (2)
  • beneficiary, contingent beneficiary, POD, TOD, update, IRA, 401(k), spouse, children (1)
  • budget, plan, cash flow, savings, online tools, spending, goals, saving, debt reduction, emergency fund, online banking, mint.com (1)
  • budget, spend, impulse purchase, behavior, savings, spending (1)
  • charity, charitable giving, IRA, rollover, required minimum distribution, RMD, qualified distribution, tax deduction (1)
  • cloud, Internet, cloud storage, online banking, document storage, e-filing, data management, sensitive data, data storage, backup (1)
  • college savings, 529, tuition, higher education, education savings accounts, (1)
  • college, tuition, 529 plan, graduation, degree, student loans, debt, beneficiary, books, room and board, FAFSA, student aid, tax free (1)
  • convert to IRA (1)
  • credit card, debt, death, taxes, creditors, estate, probate, creditors, IRA, 401k, life insurance, brokerage, survivors, beneficiary, credit score, will (1)
  • credit cards, identity theft, fraud, phishing, bill collector (1)
  • credit monitoring, credit report, scams, credit bureau, Equifax, TransUnion, Experian, fraud, identity theft, credit score, credit repair, bankruptcy, (1)
  • credit, credit cards, identity theft, cyber theft, fraud, virus, trojan horse, hackers, skimming, credit report, credit monitoring (1)
  • energy, investment, green energy, fossil fuels, coal, oil, natural gas (1)
  • financial advisor, goals, investment objectives, asset allocation, rebalance, investment strategy, risk profile, risk, risk tolerance (1)
  • financial aid, 529 plan, student loans, home equity, tuition, room and board, FAFSA, PLUS, Coverdell education savings account, IRA (1)
  • financial goals, time horizon, time frame, objective, action plan (1)
  • financial planning, retirement, 401(k), IRA, tax deferred, 529 plan, marriage, risk management, insurance, taxes, estate planning (1)
  • goals, retirement, time frame, inflation, employment, compounding, interest, returns, wages, 401(k), IRA (1)
  • identity theft, hackers, breach, security, cyber thieves, passwords, malware, viruses, trojan horse, anti-virus, (1)
  • insurance, costs, liability, net worth, insurance agent, umbrella policy, catastrophe policy (1)
  • insurance, life insurance, term life, whole life, death benefit, premiums, living benefit (1)
  • insurance, life insurance, term life, whole life, permanent life, variable life, health, lifestyle, premiums (1)
  • insurance, risk management, family, high net worth, personal goals, lifestyle, liabilities (1)
  • insurance, risk management, life insurance, disability, property & casualty (1)
  • investing, annuities, tax deferred, guarantees, lifetime income, costs, rating agencies, risk tolerance (1)
  • investing, insurance (1)
  • investments, portfolio, investment returns, diversification, Warren Buffett, strategy, risk tolerance, rebalance (1)
  • investments, portfolio, risk, volatility, yield, stock market, diversification, goals, market timing, strategy, patience (1)
  • investors, behavior, market timing, returns, savings, portfolio, investments, stock market, fear, goals (1)
  • investors, mutual funds, performance, fear and greed, market timing, portfolio, retirement, rebalance, time horizon (1)
  • IRA (1)
  • life insurance, assets, debts, income, expenses, legacy, term life, whole life, permanent, variable life, universal life, riders, rating (1)
  • life insurance, debt reduction, replace income, nexgen, permanent, term (4)
  • life insurance, family, protection, security, term, permanent, (1)
  • life insurance, financial plan, college tuition, education, debt, student loan, credit cards, income replacement, retirement plans, real estate, life and health (1)
  • life insurance, long-term care, home health care, skilled nursing, life expectancy, longevity, (3)
  • life insurance, ratings, term life, whole life, permanent life, death benefit, estate plan, beneficiary (1)
  • life insurance, term life, whole life, premiums, loved ones, survivor (1)
  • life insurance, term, whole, permanent, variable life, cash value, invest the difference, accumulation (1)
  • life insurance, whole life, permanent life, premiums, guarantee, dividends, lump sum, paid up policy (1)
  • long term care, insurance, longevity, life expectancy, nursing home, assisted living, retirement, premium, health insurance (1)
  • mutual funds, financial goals, investments, portfolio, financial planning, asset allocation, rebalance, strategy, (1)
  • phishing, spoofing, email, hacking, financial adivsor, passwords, encryption, backup, cyber security, anti virus, trojan horse (1)
  • politics, finances, invest, elections, markets, economy, (1)
  • portfolio, investing, goals, strategy, diversification, allocation, risks, costs, stocks, bonds (1)
  • real estate, investing, subprime, mortgage, risk tolerance, interest rate, buying, flipping, renting, selling (1)
  • real estate, residential, commercial, office, rent, buying, flipping, renting, management, investment, property manager (1)
  • recharacterize IRA (1)
  • retirement, annuities, fixed annuity, bull market, market correction, bear market, yield, return (1)
  • retirement, portfolio, finances, advisor, investment, budget, taxes, retire, Social Security, health, longevity (1)
  • retirement, retirement income, longevity, life expectancy, Social Security, medical expenses, healthcare (1)
  • retirement, retirement readiness, estate plan, lifestyle, lifespan (1)
  • risk tolerance (1)
  • risk, behavioral finance, investments, savings, mutual funds, investment performance, stock market, returns, goals (1)
  • robo advisor, financial situation, fintech, technology, online survey, advice (1)
  • rollover, IRA, 401k, retirement, retirement plan, investment, taxes, income tax, Roth IRA, early distribution, penalty, early withdrawal (1)
  • Roth IRA, tax free, traditional IRA, Roth conversion, AGI, eligible, filing status (1)
  • Social Security, collect benefits, benefit increase, COLA, delayed retirement, early retirement, retirement age, maximum Social Security benefits, retirement, Social Security reduction, retirement age, life expectancy, monthly Social Security benefit (1)
  • Social Security, longevity insurance, guaranteed income, lifetime income, spousal benefits, survivor benefits, early claiming, widow benefits, maximum benefit, (1)
  • Social Security, taxes, pensions, IRAs, interest, dividends, withholding, income (1)
  • stock market, investor, returns, risk, portfolio, (1)
  • stock market, performance, elections, investments, taxes, presidents (1)
  • stocks, all time high, retiree, social security, IRA, retirement, income, stock market, diversify, portfolio, investments, (1)
  • stocks, all-time highs, volatility, stock market, retirement, retiree, pension, IRA, withdrawal, diversified, diversification, income, yield, portfolio (1)
  • stocks, stock market, retirement, retiree, all-time high, income, investors, portfolio, Social Security, diversification, assets (1)
  • student loans, consolidation, private loan, federal loans, FFEL, repayment, DOE, department of education (1)
  • taxes, tax extension, april 15th, 1099, 1098, W2, deduction, IRA, Roth IRA, charitable donation (1)
  • time horizon, money, wealth, compounding, rate of return, inflation, taxes, retirement, cost of waiting (1)
  • Warren Buffett, investing, retirement, stock market, volatility, interest rates, bull market, bear market, investors, investment, mutual fund, exchange traded fund (1)
  • wealth, money, risk, emotions, lucky, dishonest, fear, greed, Occupy Wall Street, (1)
  • year-end planning, tax planning, tax bracket, adjusted gross income, tax deduction, business deduction, tax software (1)

Contact Us

Don't hesitate to get in touch with us.
We would love the opportunity to become your trusted advisor.

Phone: 410-357-0668
Fax: 410-357-4381

Email: scot@sscm-inc.com

21646 Keeney Mill Road, Freeland, MD 21053

Get Directions

Quick Message

  • Google Plus One
  • Tweet Widget
  • Linkedin Share Button

At Stark Strategic Capital Management, Inc. we work collaboratively with you as your personal financial planner and investment advisor offering you a wide range of services from financial and investment planning, insurance and risk management, retirement planning, retirement income and distribution strategies, all while optimizing your asset allocation. Our primary goal is to customize each and every solution and strategy in a personalized and distinct way as your individual, unique circumstances require.

We serve clients in the immediate Maryland area and on the east coast from New Jersey to Florida. Our owner, Scot L. Stark is a certified financial planner® professional - CFP®. 

  • Sitemap
  • Legal, privacy, copyright and trademark information

© 2021 Stark Strategic Capital Management, Inc.. All rights reserved.

Website Design For Financial Services Professionals