financial advisor explaining fixed index annuitiesPlanning for retirement is essential to securing your financial future and achieving the comfortable and stress-free retirement you deserve. However, with many options available, knowing which ones to combine to create the most effective retirement portfolio can be challenging. Fortunately, you've come to the right place for guidance.

At Leonard Financial Solutions, our experienced and trusted financial advisors in Moorestown, led by Jonathan Leonard, help clients throughout the United States choose and manage retirement investments that empower them to reach their goals. You don't need to be a savvy or experienced investor to work with us. We're happy to start at square one and walk you through all your options.

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Fixed Index Annuities Are One of Our Top Recommendations for Retirement Planning Clients

We frequently recommend fixed-index annuities to clients planning for retirement. If you're wondering what they are and how they work, we're here to help. Here's what you should know about these versatile financial products, their role in a diversified portfolio, and how they compare to other popular retirement investments.

Exploring How a Fixed Index Annuity Functions

Fixed index annuities are insurance-based long-term savings and investment instruments that provide guaranteed minimum interest rates, as well as growth potential, based on the performance of a selected market index. 

You can purchase and fund a fixed index annuity with a single lump sum or make a series of premium payments during the initial part of the contract, called the accumulation phase. During this period, your account earns a guaranteed minimum interest rate, ensuring that your return is never less than zero, even in a market downturn. If your chosen market index does well, you could enjoy an even higher interest rate.

In the annuitization phase, the principal investment and accumulated growth are converted into a stream of periodic payments, with the amount and frequency varying according to the terms of the annuity contract.

Comparing Fixed-Index Annuities to Other Popular Retirement Options

From tax-deferred growth to the prospect of participating in market gains, a fixed-indexed annuity offers numerous benefits, including:

  • Purchasing and funding flexibility
  • Principal protection
  • Growth potential
  • Limited liquidity
  • Lifetime income options 
  • Death benefit

Here's a look at how fixed-index annuities measure up to other types of annuities, mutual funds, and certificates of deposit (CD).

How Fixed Index Annuities Stack Up to Other Annuity Types

Wide-ranging annuity types exist to meet various needs. Offering all the benefits of an up market with no risk, fixed-indexed annuities stand out compared to other retirement annuities.

Fixed Annuities

Though their names and some of their features are similar, don't confuse fixed indexed annuities with their more restrictive and less beneficial counterparts, fixed annuities. Both annuities protect your principal investment, so you can't lose money, and provide a guaranteed annual interest rate. However, fixed annuities offer no opportunity for growth, and fixed-index annuities do offer growth opportunities.

Variable Annuities

Are you ready for a potentially wild ride? Buckle up—high-risk tolerance is required if your portfolio has a variable annuity. Like fixed-indexed annuities, variable annuities let you peg your returns to the performance of an underlying investment. However, there's a key difference: While fixed and fixed-indexed annuities offer downside protection, variable annuities are subject to market volatility, so you could lose the money you've invested in a downturn. Though variable annuities provide the potential for market-driven gains, they also expose you to substantial risk and typically involve significant management fees. As a result, we believe there are better options to help retirees achieve their objectives.

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Mutual Funds Versus Fixed-Index Annuities

Mutual funds are another type of investment vehicle whose value fluctuates depending on the performance of underlying securities. Whereas fixed-indexed annuities offer downside protection with upside potential, mutual funds participate fully in market gains and losses. Another notable difference is that mutual fund shares are designed for daily trading. At the same time, fixed-indexed annuities are specifically tailored to assist you in achieving long-term savings and income goals.

How a Fixed-Index Annuity Compares to a Certificate of Deposit (CD)

Though fixed index annuities and CDs provide principal protection, you can't lose the money you've invested, but the similarities end there. While CDs offer a fixed interest rate for a predetermined period, fixed-index annuities allow higher returns due to their market-linked interest potential. That's not the only way fixed-indexed annuities and CDs differ: Fixed-index annuities also tend to offer more flexible withdrawal options. Also, whereas fixed-indexed annuities are better suited for long-term retirement planning, CDs are better known for helping investors achieve short- to medium-term savings objectives.

Providing Financial Security and Peace of Mind for Your Retirement

With lifespans lengthening and the cost of almost everything on the rise, concerns about outliving retirement funds are becoming more common, and people planning for retirement must be more strategic than ever with their investments. 

At Leonard Financial Solutions, we recommend fixed indexed annuities to our retirement planning clients as part of a comprehensive strategy that balances investments providing principal protection with those offering growth potential. Adding a fixed-indexed annuity to your investment portfolio can provide financial security and peace of mind for retirement. These investment instruments let you pay a lump sum or periodic premiums in exchange for a guaranteed future income stream and offer downside protection, making them ideal for people concerned with longevity or loss in retirement. 

Fixed-indexed annuities are also an excellent option for retirement investors who want to take advantage of market-driven gains without exposing their principal investment to market volatility. With a indexed annuity, you can enjoy the growth potential of owning stocks or a variable annuity with absolutely none of the risk.

Our Fixed Index Annuities Offer Superior Flexibility and Growth Potential

Fixed-indexed retirement annuities provide clear benefits compared to other popular retirement investments, but the fixed-indexed annuity plans we offer at Leonard Financial Solutions deliver even more advantages. 

  • Purchasing and Funding Flexibility. Purchase or fund your annuity with a single lump sum deposit or monthly premiums. The choice is yours.
  • Principal Protection. These types of annuities shield your principal from losses. Even when your chosen market index performs poorly, your annual interest rate is never less than zero.
  • Uncapped Growth Potential. In addition to providing downside protection, a fixed-indexed annuity lets you enjoy market gains when your selected market index does well—and while some annuities impose limits on interest accrual, ours don't. Why limit your potential? Take advantage of annuity plans that allow for true participation in market-driven gains.
  • Lifetime Income Options. With fixed-indexed annuities, you don't have to worry about running out of money if you live long enough. These investment vehicles offer lifetime income options that protect against longevity risk and provide peace of mind.
  • No Fees. Unlike variable annuities, fixed-indexed annuities don't entail up-front fees. The annuity company automatically deducts an annual fee from your account balance.
  • Surrender Period. Need access to your annuity funds early? No problem. These annuities let you pay a penalty fee to cash in—or "surrender"—the annuity before annuitization.
  • Limited Liquidity. Want to be able to access a portion of your funds before annuitization? Our annuity plans let you withdraw up to 10 percent of the contract's value each year during the accumulation period (the first ten years).
  • Returns That Typically Beat Inflation. Are you worried that inflation will wipe out your annual interest rate? The annuities we offer historically outperform inflation. 
  • Chronic or Terminal Illness Rider. Our fixed-indexed annuity plans include an illness waiver that allows for penalty-free withdrawals or surrenders if you require long-term care or are diagnosed with a terminal illness in the accumulation phase. 

Why Choose Leonard Financial Solutions for Financial Planning?

Partnering with an experienced retirement planner is a great way to maximize your efforts to build a stronger financial future. At Leonard Financial Solutions in New Jersey, our team listens to you, assessing your current financial situation and then creating a plan customized to specific goals and needs. We can guide you through investments, asset allocation decisions, tax planning strategies, Social Security benefits, estate planning, managing risk, and much more.

Schedule a Free Consultation

When you work with us, you can rest assured the options you choose align perfectly with your overall goals for financial security. Contact us today for a free consultation by clicking the button above or calling 856-444-5433 now. Although we're located in Moorestown, New Jersey, we serve clients from all over the United States.

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