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By Thomas Shultz

February 1, 2019

Many people work in hopes that one day they can enjoy their golden years and live a happy, stress-free retirement. Unfortunately, in 2019 that is not the case for millions of Americans. These people work hard and save their money, only to continue living paycheck to paycheck during retirement. Plans to travel and other luxury opportunities have been put on the back burner. Stock market declines, rising health care costs, and the uncertainty of Social Security are costly concerns that leave millions of Americans with questions during their retirement years.

It is important to remember that once you retire, you are now in the wealth-preservation phase. What you earn is not as important as what you can preserve. With advances in medical technology, people are living longer than ever before, leading to more variables that can affect your retirement accounts. Living longer means you will likely need to spend more money, accompanied by unpredictable politics and health care costs. It is also no secret that market volatility exists, and it always will. If your life savings are in the market, they are at risk - plain and simple. You must decide if you are willing to take that risk and whether you can sustain a loss similar to past recessions. Because of these risks, more and more retirees are utilizing the benefits of annuities inside a balanced portfolio.
The annuity industry is gigantic. With so many different companies and types of annuities, navigating these waters and finding the right solution for your needs can be complicated. In this article, we will explore 1 particular type of annui-ty, a fixed-indexed annuity.These products have become increasingly popular because of their versatility and ability to offer protection against market volatility.
So, What Is A Fixed Indexed Annuity?

An indexed annuity in the United States is a type of tax-deferred annuity whose credited interest is linked to an equity index; i.e. the S&P 500, the NASDAQ, Dow Jones or an international index. It guarantees a minimum interest rate and protects against a loss of principal due to market downturns. The interest you are credited is typically a percentage of a major stock market index (usually around 50%) but provides protection when the index suffers. FIAs are designed to eliminate market risk and help ensure your principal isn’t affected by the market. Imagine being able to participate in some of the gains of a healthy market while having protection against the down years.

FIAs don’t have any investment management fees associated with them (although optional riders may have fees). Management fees are severe because the cost comes at a price whether your account is growing or declining in value. When you get ready to retire, you cannot afford to pay fees that may drain your savings over time. The truth of the matter is that nobody knows what the market is going to do, not even your financial advisor. You are paying fees and still rolling the dice. With an indexed annuity, the agent or advisor who writes the policy is paid once from the insurance carrier’s profits and revenue, leaving 100% of your money to go to work for you from day one, generally with no recurring fees.
Annuities Are Designed To Create Income for Life Most FIAs have optional add-ons, or riders. One of the most common riders is an income rider. Depending on your contract, there may be an annual fee charged for this benefit. An annuity is the only strategy that can provide you with a consistent income payment for life, no matter how long you live. The check keeps coming even if the account balance decreases to zero. An income rider can be a considerable advantage in your retirement portfolio. Whether you are replacing income you once made during your working years or supplementing Social Security; knowing you have a check coming, regardless of how long you live, can bring added peace of mind to your retirement.
Misconceptions about annuities, in general, are common. A major misconception regarding income riders is that once you turn that income on, you must relinquish control of your money to the insurance company, which is not the case. The industry has come a long way and unlike immediate annuities, income riders allow you to maintain control of the money in the annuity. Depending on your contract, you can stop taking the income anytime you want and still have access to your account. If you were to pass away after you started taking income, the remaining balance of your account would go to your beneficiaries (depending on optional riders). The indexed annuity’s flexibility can help give you the tools you need for a healthy retirement.

Why Do Some People Say Annuities Are Illiquid?

A common objection with these products is the surrender fees associated with them. A surrender fee is what you are charged for withdrawing your funds before a set number of years, depending on your contract. It is important to remember that for every year you hold the contract, the surrender fee diminishes until it is eventually gone. This concern leads to the common misconception that annuities are not good strategies due to the lack of liquidity. That is not the case: Index annuities typically allow the retiree to withdraw up to 10% or even 20% of their contract’s total value every year with no penalties or fees. So, for example, if you have $400,000 in an annuity, you could withdraw $40,000 per year or $80,000 per year with no penalties (given a contract withdrawal of up to 10% or 20% per year). Annuities Are A conservative investment Fixed-Indexed Annuities are not a get-rich-quick scheme; they are quite the opposite. The sole purpose of an FIA is to maintain the wealth that you have worked hard for and guarantee that your money is going to be there for you for the rest of your life. It is important to remember how valuable your retirement years are.


These are the years you have been anticipating. How can you genuinely enjoy them if most of your money is at risk? Imagine not having to check the news about the market or worry if your life savings have experienced a loss. This mental freedom can allow you to get the most out of your retirement. Whether it is traveling the world with your spouse, enjoying precious moments with your grandchildren, or pursuing that business you always wanted to start, you deserve to experience those moments with added peace of mind and confidence in your future. A fixed-indexed annuity is one of the options you have that can help ensure your life savings and can help give you the life in retirement that you desire.


Here at Lyfe Advisors, we put together comprehensive financial plans for folks every single day. Even if you are currently working with an advisor, a 2nd opinion in this type of market is paramount for your portfolio.

Are you prepared financially for retirement, preserving your legacy, or a medical emergency?

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