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Better than Bonds? The Case for Uncapped Fixed Indexed Annuities

By December 20, 2022 No Comments


Uncapped fixed indexed annuities can help you experience growth and principal protection!

The current market environment “could not be a more perfect time” for those who are in the “retirement red zone” to add a fixed indexed annuity to their portfolio. That was the word from Igor Zamkovsky, head of indexed annuities and insurance with Blackrock’s Retirement Insurance Group.

Zamkovsky made the case for adding FIAs in the accumulation phase of a client’s retirement portfolio at a webinar presented by the National Association for Fixed Annuities. The retirement red zone refers to the time period of roughly five years before retirement to five years after retiring. “If you happen to be retiring in 2022 and your portfolio is down 20% and you’re not overfunded, something has to give,” Zamkovsky said.

With so many investment classes down, “Having protected retirement solutions is more important than ever,” he said. “We’re in an incredibly dynamic market environment. But the overall concepts surrounding the value of FIAs are still true.”

The Research: How Market Losses Affect Portfolios

Most people have three basic hopes for their investments. They want growth, safety and liquidity. Unfortunately, there are very few options that offer all three. So, how much do losses matter when you look at returns over the long term? A few years ago, financial researcher and author Jack Marrion conducted a study to answer that question. He chose a 50-year period, from Jan. 1, 1960, to Jan. 1, 2010, and compared how a $1,000 investment in the S&P 500 would have performed under three different scenarios: with no dividends, with dividends, and with no dividends and no losses. The first two scenarios followed the ups and downs of the market. The third followed the strategy of an indexed annuity, which is not invested in the markets, doesn’t include dividends, and credits interest based on how a market index performs.

  1. In the first scenario, with no dividends, the $1,000 investment resulted in an ending balance of $18,615.
  2. In the second, with dividends included, the ending balance was $84,260.
  3. And in the third, with no dividends but no losses, the end balance was $179,624.

Could an Uncapped Fixed Indexed Annuity be the Right Decision for You?

These numbers speak for themselves. The conclusion, obviously, is that losses matter a lot. This illustrates why fixed indexed annuities are often considered to be a suitable bond alternative, especially for retirees. They protect principal, avoid the losses bonds can experience and can provide reliable, lifetime income, which is critical in times of increasing market volatility.

If you have any questions about how an uncapped fixed indexed annuity can protect your financial plan, please give Sylvan Financial Advisors a call at (201) 282-5332.