Ask Terry Questions Fixed Index Annuities

Fixed Index Annuities

By Terry Savage on January 23, 2021 | Investments

What are some alternatives to a fixed index annuity for asset protection and retirement growth? An advisor is recommending this for guaranteed fixed income but I’m leery of the hidden fees and eventual tax of ordinary income of assets when withdrawn. I’ve read commission for this product are quite large.

Terry Says

You’re absolutely correct about the hidden fees, limitations, and other issues with these product. Read this column for details of all the issues.
But I’m a little uncertain about your wording of “asset protection and retirement growth.” If you’re just looking for a conservative investment alternative, consider an Equity-Income fund at Vanguard, T. Rowe Price, or Fidelity. there are no downside guarantees with these funds, but remember there has never been a 20 year period where you would have lost money in a diversified portfolio of large-company American stocks with dividends reinvested.

As you’ll note with the annuity product, you do have a downside guarantee — but your upside potential is severely restricted, despite the “promises” of “indexes” that “track the stock market”!!

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