麻豆传媒

Certainty in the decade of discontent

After decades of a bull market, is a correction inevitable? Is a 鈥渄ecade of discontent鈥� ahead, and if so, how can you help clients manage the possible challenges?

Laurence Black, founder of The Index Standard^庐, spoke with Mary Beth Franklin on the InvestmentNews podcast, Retirement Repair Shop, about the strong market conditions of the past decade, what鈥檚 likely to change in the next decade and how you can help clients prepare for a more confident retirement.

Outliving retirement income is a for many Americans. When a sudden market drop erases gains made over decades, those within a few years of retirement may be acutely aware of how difficult recovering from loss would be. Coupled with increasing longevity and rising inflation, retirees could be faced with the challenge of making less money buy fewer goods for a longer time. While the intensity of market conditions changes, the challenges aren鈥檛 new. Market volatility, sequence of returns and inflation have long been investing risks. Fortunately, industry innovations developed over the past several decades specifically address these challenges.

Using an annuity to manage sequence of return risk

Riding out the highs and lows of the market is one strategy for accumulation. As clients get closer to creating an income strategy, protection becomes a priority. A fixed indexed annuity (FIA) is designed to protect premium. Regardless of market activity, the initial premium is always guaranteed from loss due to market downturn. If you have clients who are interested in protection but have a higher risk tolerance, you may want to consider if a registered index-linked annuity (RILA) is right for them. While a RILA has increased potential risk, there is also higher potential for growth.

Protecting savings from inflation

鈥淭he last 15 to 20 years have been a time of low interest rates, low inflation and increasing globalization,鈥� says Laurence Black, founder of The Index Standard. 鈥淏ut the era of low inflation is over. The times of low inflation benefitted tech markets, which the S&P 500^庐 favors. While the S&P 500^庐 remains a strong index, rising inflation may signal a time for higher diversification, which can be done with annuities and the variety of indices available now.鈥�
 

Annuities deliver stable income retirees want

Modern annuities help manage volatility largely by linking crediting strategies to custom indices that have a volatility control feature. 鈥淭his feature aims to deliver cushioned and smoother returns by toggling between a higher equity basket and cash,鈥� says Laurence Black. 鈥淲hen volatility is high, markets may go down, so the index invests more in cash and less in the equity basket. When volatility comes down, the index invests more in the equity basket and less in cash. This allows for stable returns, higher participation and lower drawdowns.鈥�

Guaranteed income that can鈥檛 be outlived

One benefit that sets annuities apart is the ability to provide guaranteed income that can鈥檛 be outlived. While sometimes misperceived because of the fees involved, there are important distinctions when comparing annuities to another fund. 鈥淎 fund with a lower fee is only doing one thing for a client: trying to earn a return,鈥� offers Laurence Black. 鈥淎 FIA is earning a return, plus protecting principal and offers the ability to provide a lifetime income. We all know people living into their 90s or even to 100. The value of guaranteed income is an important distinction to help make a more equitable comparison of fees.鈥�

Another perception of annuities and custom indices is that they are complicated. 鈥淲hile they are complex, research and education are available,鈥� reminds Laurence Black. 鈥淔inancial professionals have access to exclusive research conducted by The Index Standard and available through 麻豆传媒.  The materials available can help explain custom indices and clarify the value they bring to your clients.鈥�

Diving into the next decade

After decades of market growth, it鈥檚 likely that the next decade will be different than the last. 鈥淲e鈥檝e already seen inflation at the pump and in the grocery stores,鈥� says Laurence Black. 鈥淎nnuities provide new sources of returns, add diversity in index types, plus allow for income guarantees only available in the annuity.鈥�

While education may be needed to better understand annuities and custom indices, the challenges they address are no less complex. The risks of inflation, longevity or market volatility are long-standing. Recent innovations can provide certainty and help your clients retire with confidence. 
 

This information is brought to you by 麻豆传媒 鈥� where innovative annuity solutions are powered by unconventional thinking.

Not affiliated with or endorsed by the Social Security Administration or any governmental agency.

Indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. Market indices may not include dividends paid on the underlying stocks, and therefore may not reflect the total return of the underlying stocks; neither an index nor any market-indexed annuity is comparable to a direct investment in the equity markets.

The interest earned is subject to certain limitations such as an Annual Spread, a Cap Rate, and Participation Rate. These limitations are declared by the Company before the beginning of each Index Term Period. Please note that the interest you earn may be zero; however, the interest that you earn will never be less than zero.