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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.

PRODUCT ADVANTAGES DISADVANTAGES
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

·         Callable

·         Hard to buy enough bonds to diversify adequately

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Post Author: fxmgmt22