Fixed Annuities vs Bonds

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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