Fixed Index Annuities

Hi Terry, I am a long time fan of yours and value your opinion. My husband and I are thinking about adding a fixed index annuity to our investment portfolio. We currently work with a fee based only financial adcisor who says annuities are bad. We have a diverse investment portfolio of about $557,000 and real estate of about $250,000. What are your feeling on fixed index annuities? Can they have a place in an investment portfolio?

Terry Says:  I think they are typically a bad investment — because the gains never fully reflect the growth of the stock market.  (Some are indexed to a certain extent, or do not include the dividend yield of the index, or are in some other way limited to the return).  So you get blinded by promises of higher market returns with “no downside risk” but the money grows in an account that can only be accessed by regular withdrawals (called the “income base”) — not by taking out the gains in cash!!  I’m so happy to hear you are with a fee-only advisor who knows this all to be true.  The person who is trying to sell you the indexed annuity is going to make a big commission off you if you don’t listen to your advisor!