Fixed Annuities vs Bonds
Looking for the principal protection found in fixed income options, while still maintaining the potential for additional interest credit, you may benefit from a fixed index annuity. A fixed index annuity, commonly referred to as an FIA, works in any type of market. Whether up, down, or flat, an FIA provides the protection of principal found with a traditional fixed annuity along with the potential for additional interest credit linked, in part, to the performance of a market index.
As a conservative investment option, bonds are a good way to help offset swings in the stock market, as long as you don’t need extra liquidity. But fixed annuities offer even more stability, including a guaranteed rate of return and access to money.
With the appropriate fixed annuities, you can reduce risk while still earning a competitive rate of return. Plus, you can get some added benefits. Look at the chart below to see how fixed annuities compare to bond investments.
|Fixed Annuities||· Low risk
· Guaranteed rate of return
· Tax-deferred growth
· Avoids probate
· Optional income for life
· No front-end or annual fees
· Free annual partial surrender without any surrender charges
· Typically no surrender charge if become terminally ill or needing nursing home
|· Withdrawals exceeding the partial surrender amount are subject to a surrender charge and a possible 10% IRS penalty tax if under age 59 ½|
|Bonds||· Liquid – can sell at any time
· No IRS penalties if redeemed before age 59 ½
· Potentially higher rate of return
|· Subject to market volatility – may lose value
· Commission charges to buy and sell
· Hard to buy enough bonds to diversify adequately
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