The One Percent Solution – syndicated financial columnist Steve Savant interviews Tom Hegna.

Is Your Money Searching for Sanctuary?

1/19/2017

Understanding Your Psychonomics Risk Could Change the Way You Invest

In the old days, a retiree could generate 4 to 6 percent from their bank CDs, but those days are gone and may return in our lifetime. And as the Fed moves rates up, what little luster bonds had possessed is marred by their values going down. There’s no silver bullet in opening up offshore accounts or banking on gold to bail you out.

Fixed indexed annuities can be a safe alternative with reasonable returns and downside protection of principle, with a variety of indices both foreign and domestic. The S&P 500 is still the number-one choice of financial advisors and insurance agents. After all, it’s the vanguard of indices in the U.S. While fixed indexed annuity returns don’t participate in dividends, it does guarantee zero is the worst crediting rate in any given crediting period.

Fixed indexed annuities are not FDIC-insured, so due care is necessary in selecting an insurance carrier with high ratings from several rating services. You may want to have the balance sheet summary reviewed by your accountant or attorney for extra due diligence.

Fixed indexed annuities generally maintain an income option or rider that permits annuitization or withdrawals from the policy. Keep in mind annuitizing an annuity is a great option for lifetime benefits you can’t outlive, but make sure you have other liquid assets you can access because you can’t liquidate an annuity policy in annuitization mode.

Another option to keep in mind before you annuitize or withdraw from a fixed indexed annuity is to shop the market for single premium immediate annuity or deferred income annuity to calculate which policy generates the largest payout.

Fixed indexed annuities could be good alternatives to holding bonds or balanced income funds. They could actually lower your overall portfolio risk as well. Many financial advisors recommend using fixed indexed annuities to insure part of your portfolio against market downturns.