Planning 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 independent financial advisors, led by CEO 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.
Fixed Indexed Annuities Are One of Our Top Recommendations for Retirement Planning Clients
We frequently recommend fixed indexed 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 Indexed Annuity Functions
Fixed indexed 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 have the flexibility to purchase and fund a fixed indexed 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 Indexed Annuities to Other Popular Retirement Investments
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 indexed annuities measure up to other types of annuities, mutual funds, and certificates of deposit (CD).
How Fixed Indexed 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 none of the risk, fixed indexed annuities are the clear standout 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 types of 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 indexed annuities do offer growth opportunities.
Variable Annuities
Are you ready for a potentially wild ride? Buckle up—high risk tolerance is required if you have a variable annuity in your portfolio. 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.
Mutual Funds Versus Fixed Indexed 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, while fixed indexed annuities are specifically tailored to assist you in achieving long-term savings and income goals.
How a Fixed Indexed Annuity Compares to a Certificate of Deposit (CD)
Though fixed indexed annuities and CDs both provide principal protection, so you can't lose the money you've invested, the similarities end there. While CDs offer a fixed interest rate for a predetermined period, fixed indexed annuities allow for the possibility of higher returns due to their market-linked interest potential. That's not the only way fixed indexed annuities and CDs differ: Fixed indexed 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.
Fixed Indexed Annuities Can Provide 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 retirement peace of mind. 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 fixed indexed annuity, you can enjoy the growth potential of owning stocks or a variable annuity with absolutely none of the risk.
Our Fixed Indexed Annuities Offer Superior Flexibility and Growth Potential
Fixed indexed 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 fixed indexed annuity with a single lump sum deposit or monthly premiums. The choice is yours.
Principal Protection
Fixed indexed 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 fixed indexed annuities impose limits on interest accrual, ours don't. Why limit your potential? Take advantage of fixed indexed 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. Fixed indexed 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 fixed indexed annuity plans let you withdraw up to 10 percent of the contract's value each year during the accumulation period (the first 10 years).
Returns That Typically Beat Inflation
Are you worried that inflation will wipe out your annual interest rate? The fixed indexed 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 surrender if you require long-term care or are diagnosed with a terminal illness in the accumulation phase.