Fixed Indexed Annuity"s

A fixed annuity is designed to hedge a stock market downturn or correction, or even a crash however defined. It is correct the protection a fixed-indexed annuity provides during those times doesn"t make up for the opportunity cost of you missing out on the returns of longer bull markets. Without question stocks can significantly outperform investment returns of a fixed-indexed annuity.

Fixed-indexed annuities offer investors a return based a specific market benchmark such as the Standard and Poor"s. It is a given that the returns will not compete with stock market indexes in a bull market. That, however, is not what they were designed to do.

They are for risk adverse investors who don"t want to stomach the volatility of the stock market but would like to participate in potential better gains. It"s an annuity so why would you expect to get stock market returns.

Consider the stock market seems to crash at the end of every generational spending wave. When the Henry Ford Generation retired, 1929. When the Bob Hope Generation retired in the late 70"s early 80"s the stock market crashed in an ugly inflationary recession.

Now, the Boomers, the biggest generation yet is retiring. We don"t know if we have already seen the recession from the Boomers retiring in 2008 or is it yet to come. In addition, the 100-year mark for the Great Depression is moving towards 2029. There is no guarantee that 100-year cycle will play out with a depression. Vision for what it will bring is for the prognosticators.

One thing we do know is the Federal Reserve and Washington created a huge asset bubble in stocks, bonds and real estate. The Federal Reserve was protecting us from a depression and as a result protected real estate values out of the 2008 Great Recession. Between Quantitative easing (QE for short) means buying bonds to push up their prices bringing down long-term interest rates.

Which some people call printing money as who"s money were they buying the bonds with? QE plus the bailout for 2008 coupled with the bailout for the pandemic all created the biggest asset bubble in memory. With no recession/depression bringing prices down 60% or more of millennials may never be able to afford a home. Now, SCOTUS said they have to pay their student loans.

Additionally we now see companies bragging about pricing power to their shareholders. The last time this happened was around 1929 when FDR put an end to it. His belief was there has to be a fair distribution of goods and services in the country and he brought reforms. Some of those reforms have been removed that is why 80% of local TV Stations are owned by one company now. I suppose they have some pricing power.

So, while there are enough seeds for destruction no one knows for sure what will happen or when. But, for those that are in between 5 - 10 years to retirement a Fixed-indexed annuity can be a great choice.

If there are significant market gains you can participate in some of that with a fixed-indexed annuity. If there is a market downturn or crash you have a guaranteed rate of return. Investment opportunities can only get better with increased risk. A fixed-indexed Annuity is one of the few ways to protect your assets and still get better yields than a savings account. All the other pros and cons of Annuities apply.

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