By William “Bill” O’Neill, AIF® 


An annuity is an insurance-based financial product that accepts funds and then typically pays them back later in a stream of payments or lump sum. It can help protect against outliving your money by providing guaranteed payments to you for life or another pre-determined amount of time. There are 4 types of annuities that might meet your needs: immediate fixed, immediate variable, deferred fixed, and deferred variable. The two key decision factors are when you want to start receiving payments and how you want your money to grow.

Today’s equity markets are volatile. So, for this issue, let’s focus on the benefits of a fixed-rate annuity that pays a guaranteed rate. Many subscribers would feel comfortable now with a fixed interest rate on their investment to avoid that nerve-wracking volatility.

How can a fixed annuity work for you?

Annuities can be an effective way to mitigate specific market risks. The insurance company gives you a guaranteed fixed interest rate on your investment; that interest rate guarantee could last anywhere between a year and the full length of your guarantee period. The important thing to remember is that your money will earn a fixed rate of return during the life of the contract. Annuitants can reasonably expect to achieve 4%-5% in some fixed annuity products*, making them a viable option to replace some of the bond sleeve in a diversified portfolio. (*Yields in fixed annuity products will vary depending on how they are constructed.)

When your annuity contract is over, you have options: renew it, transfer the money into another contract or retirement account, or annuitize it. Investors who choose to annuitize may be attracted by knowing that they will know exactly what their future monthly income payments will be because they are not affected by equity market volatility. Some contracts (immediate) allow for the instant start of income payments, which may be attractive to you depending on age and health factors.

Bill is a Financial Consultant for Asset Strategy and is an Accredited Investment Fiduciary®.

If you are not currently a subscriber. Click the link below to check out our latest trial offer.