Fixed Annuities

by Kristin
(Oakland Park, FL, Broward County)

The current meltdown in the stock market has had mixed impact on annuities.

Variable annuities “vary in value” and have suffered sizable losses during the market meltdown.

Fixed annuities, on the other hand, have avoided losses because they are guaranteed not to lose value if the market craters. Let's look over the horizon and speculate about what the future holds for annuities:

Fixed annuities should rise in popularity because they offer safety, deferral of anticipated higher income taxes and feature lifetime income options.

If the current generation of retirement-bound boomers and retirees are permanently jaded by the recent market meltdown, the acceptance of traditional fixed annuities could surge in an environment of rising taxes and low fixed rates. This is especially true if the design changes to promote stable purchasing power during retirement.

The developing features of fixed annuities, low fixed rates from banks, expected higher taxes, and a risk-averse aging population augurs well for fixed annuities.

While there remain pluses and minuses, variable annuities are likely to continuing fading into the background as retirement investments simply because of market risk, high fees and poor performance.

The recent variable annuity losses will likely spawn further taint on their acceptance as retirement investments.