Fixed Indexed Annuities: The Rising Stars of Smart Retirement Income Strategies

The rapid rise in the popularity of fixed indexed annuities is directly related to today’s most pressing retirement challenges, which include fears of outliving one’s retirement savings.

Facing longer life expectancies and fewer traditional employer pensions, today’s Baby Boomers are looking for low risk, guaranteed income opportunities to see them through retirement. For these reasons, the pension-like income of a fixed indexed annuity (FIA)’s has become the rising star in the world of retirement planning. Part of the FIA’s rise in popularity is due to its ability to provide a lifetime income alternative to anyone.

Driving the allure is the FIA’s ability to generate returns well above historically “safe” investment products, such as corporate bonds, while delivering 100 percent principal protection. For retirees, whose number one concern is securing an income stream that they won’t outlive, FIAs have become the new darlings of the fixed income universe because of the low rates of CDs and high risks associated with bonds.

Annuities are confusing to many investors, especially retirees who may have been warned away from them for years. Generally, FIAs base the performance of an annuity upon a major index or indices—most often a stock index, like the S&P 500. Unlike investing directly in the equity markets, however, the fixed indexed annuity product itself provides principal protection in exchange for limitations on the investor’s potential for investment gains.

According to Coral Gables, Florida-based registered investment advisor Michael Ladin, the increase in FIA popularity reflects the mood of today’s retirees.

“Ninety-percent of the fixed indexed annuities available aren’t going to work, but 10 percent of them work really well for income planning to create that pension-like income,” he says. “As fewer pensions are available to retirees, more Baby Boomers are looking for additional sources of guaranteed income, and FIAs are a great option in this current financial environment.

“For many retirees, the best approach is to carve off the smallest piece of a portfolio necessary to create the income needed to protect one’s lifestyle, and then allocate the balance into the market to hedge inflation, and potentially earn higher returns.”

Ladin says that, for the greatest security, retirees should have enough guaranteed income to cover their expenses for the type of retirement they want to create. Many of today's retirees find Social Security, military retirement pay and even civilian pensions may not be enough, and withdrawing money from savings adds to concerns over running out of money during retirement.

“Folks need to know that at 59½, they have the opportunity to do an in-service rollout by moving their money from a 401k to an IRA, and then use the money to buy themselves a pension-like income via a fixed income annuity,” he says. “Give themselves the guaranteed income stream they need to create the retirement of their dreams.”

A guaranteed income annuity can fill in the income gap by exchanging a portion of the retiree’s savings for a guaranteed fixed monthly income to last for the rest of their life and/or their spouse’s life. At a time when life expectancies are longer than ever before, the fear of outliving one’s retirement savings has never been more pressing.

Regardless of what happens in the market, retirees with an FIA know they have enough to maintain their lifestyle.
Pre-retirees who are facing a future that does not include an employer-generated pension are looking at annuities as a way of purchasing their own personal pension, one that can be structured to fit their specific needs. A fixed income annuity can allow retirees to pre-determine the amount of guaranteed income or pension-like income they receive, and how often they receive their income. Monthly, quarterly or annual income options can be established upon purchasing the annuity.

Select an annuity according to how much income they expect to need each month. An experienced annuity advisor can help determine how much money each individual retiree will need to maintain their lifestyle throughout retirement.

Contact Info:
Name: Michael Ladin, President
Email: Send Email
Organization: Ladin Financial Group
Phone: (305) 444-4898

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Release ID: 91221