Aaron Cirksena, the founder and CEO of MDRN Capital, believes that optimizing your investment portfolio in retirement involves achieving the right balance. Traditionally, balancing meant finding the right mix of stocks and bonds, with percentages shifting over time. However, limiting a portfolio to just stocks and bonds could mean limiting earning potential in today’s market. Fixed index annuities (FIAs) are an asset class that provides a low-risk, income-generating option similar to bonds, but with the added benefit of no-fee options and the potential for higher returns.
FIAs bring three key features to an investment portfolio. First, they lower the risks associated with market volatility by anchoring performance to an external market index, providing a safety net for market fluctuations. Second, FIAs offer principal protection, meaning a downturn in the index does not impact the principal amount invested. Third, FIAs can guarantee income for life, as annuities are contracts between the purchaser and an insurance company, providing a payout over a set period of time backed by the financial strength of the insurance company.
Fees play a significant role in the performance of investment assets. FIAs offer no-fee options, allowing a larger portion of contributions to drive growth. By eliminating annual fees, FIAs can potentially outperform traditional investments. While FIAs do not charge annual fees, some additional costs such as rider fees or surrender charges may apply, depending on the specific annuity.
With inflation impacting the earning potential of bonds, now is a great time to consider FIAs as an alternative. Rising interest rates are negatively affecting bond performance, making FIAs a more attractive option tied to stock indexes. The ideal FIA investor is someone looking to maximize return while keeping their principal protected, making FIAs a suitable investment choice for those who are risk-averse but still want to benefit from market gains.
While FIAs have drawbacks such as limited liquidity and caps on index gains, they can still be a valuable addition to a retirement portfolio. Ideal FIA investors are those willing to look beyond conventional investment wisdom and explore alternative options to achieve their financial goals. It is important for investors to do thorough research on the time commitments, fees, and interest payments associated with FIAs before making investment decisions.
In conclusion, FIAs offer a unique alternative to traditional investments like bonds, providing the potential for higher returns with lower risk. As the financial landscape evolves, investors should consider all available options to optimize their investment portfolios for retirement. Consulting with a licensed professional is recommended to make informed decisions based on individual financial situations.
