Trends for Fixed Annuities in 2015
Once simply viewed as a safe way to guarantee a lifetime stream of income, fixed annuities have emerged as a balanced instrument that offers the potential for wealth accumulation. This potential has made fixed annuities a top choice for many soon-to-be retirees, and there is no sign of this changing in 2015.
Insurance News Net released the following list of trends for fixed annuities in 2015:
- The end of quantitative easing (QE) will create uneasy investors. QE is the process through which the Federal Reserve bought treasury bonds to spur private spending and growth during and after the economic downturn. It is unclear how the stock market will perform with the Federal Reserve having ended quantitative easing.
- “What many don’t realize about delaying their fixed annuity purchase is that they may be hurting their overall accumulation potential. A fixed annuity’s compounded growth and tax-deferral status can grow savings faster than one may think. A year of tax deferral growth can have a great impact in your accumulation.”
- Purchasers are getting younger.According to a recent LIMRA (Life Insurance and Market Research Association) study, half of all annuity purchasers are under age 60.This trend shows increasing awareness and concern around retirement preparedness among people of all ages. An exciting development!!
- “Fixed annuities are a practical option for financially conservative clients — particularly those who want to see a return on their investment. Many who are preparing for retirement have a low risk tolerance; a fixed annuity can work well for those who don’t want to gamble with money they’ve worked so hard to accumulate for retirement.”
- Watch for new products. Insurance companies are always examining the needs of their customers and reviewing their product portfolio to ensure customers get the best retirement saving options, tailored to their specific needs.
- “Many carriers are hoping to create annuities that help expand options for consumers while providing the same rate of return.”
- The benefits of wealth transfer.A fixed annuity can be used to transfer money from a purchaser’s estate directly to select beneficiaries, offering additional flexibility and freedom.
- “Death benefits payable to their heirs, especially in large sums, could actually be a burden. The taxes associated with the proceeds could place beneficiaries in a different tax bracket and/or eat up a significant portion of an inheritance. Fixed annuity payments can help spread out that impact.”
The overriding trend is that when preparing for retirement in America, risk tolerance is extremely low. As you think about balancing your financial retirement portfolio in 2015, one option to ease your risk is a fixed indexed annuity (FIA). FIAs protect you from market volatility, while also allowing the potential for additional interest based on an external index. With a FIA, your principal is protected, and the value can increase based off of index growth, but will never decline.