Nobody likes to lose money, unless you have a lot to lose. And even then, I am not at all convinced that those who have even a slightly higher risk tolerance can’t help but wince when faced with a market loss.
As a financial advisor who has played on both sides of the fence, the equity side and the insurance side, I never cease to marvel at the great divide between the equity argument (ie using stocks for growth,) and the “insurance guys”, (using insurance products such as annuities to build wealth outside of the market.)
There exists a great divide between two different approaches to building and securing wealth. But in the end, it's not what you make, it's what you keep, and how long those dollars can last throughout your retirement years.
I listened to an in-depth radio interview recently, in which a principal partner in a leading private equity firm discussed recent market trends and how to prepare for retirement in light of those not necessarily positive trends. He discussed such things as “getting comfortable being uncomfortable”, “following trends to minimize market risk”, and “establishing confidence in the market by reducing draw downs.” In short, leaving your money in the market longer, to allow for additional time to recoup from market losses. But what if you are nearing or already in retirement, and don’t have that time? Terms such as “peak sequence risk, alphas and tracking errors” were referenced, but in short, the synopsis seemed to be getting used to a new comfort level when calculating risk into your retirement income. Surprising to hear with regard to hard earned retirement dollars.
As an advisor who’s market niche is helping people accumulate and preserve assets for future income, I am always a little surprised when an advisor side steps the possibility of adding annuities to one's portfolio as a way to build wealth outside the market, as in the case above. And even when seeking a safe alternative to the market, many will even admit that bonds do little these days in providing a return, yet still fail to mention the use of an annuity as an alternative to bonds when seeking safety of principal and income. Hence the “great divide” between wall street equity guys and the insurance side of the financial services industry.
Certainly, with the proper time horizons in place, no one can argue that using the market can be a proper approach to accumulating retirement dollars. But as one nears closer to retirement does it not make sense to safeguard against any future losses with something other than re-adjusting one’s comfort level? Equity-Indexed annuities are designed to take advantage of upswings in the market while bypassing risk. They provide an opportunity to protect what you’ve earned and make sure it lasts.
Equity indexed annuities score very high marks for overall inclusion in an investment portfolio, particularly when seeking alternatives to bonds while minimizing risk and increase return. Check with your financial advisor to see if an equity indexed annuity is right for you.