Want to Stay Safe From Stock Market Corrections? Here’s How
If you’ve been listening to the radio, you know that the stock market has just had a correction, which is a 10% drop in stocks from their last peak.
Since January 26, the S&P 500 and the Dow have fallen over 10%.
Credit: Yahoo! Finance in partnership with ChartIQ
While many financial experts are saying that this was bound to happen and that stocks should be just fine soon, there’s no doubt that losing 10% of your money in just a few days really… stinks.
But there is a way to stay safe from the stock market corrections – and that’s called a fixed annuity.
Stay safe from stock market corrections with a fixed annuity
A fixed annuity is a way to make interest on your money without losing it due to stock market corrections or crashes.
Yes, it’s true! You can grow your savings without any risk at all.
There are 2 popular types of fixed annuities that we work with every day, and those are called MYGAs and FIAs. (Don’t be overwhelmed by the acronyms – we promise these are easy to understand.)
MYGAs – Multi-Year Guaranteed Annuities
Multi-Year Guaranteed Annuities are the most popular type of annuity that we sell. And it’s actually self explanatory once you really think about.
Multi-Year stands for the contract length. For example, your annuity lasts for 5 years. You can also choose 1, 3, 7, and so on, but 5 is the most common.
Guaranteed stands for the guaranteed interest rate. You are promised a set interest rate for the duration of your contract, and to give you an idea, the typical MYGA interest rate is a little better than 3%.
The big bonus of a MYGA is that it’s predictable. You know what you’ll have after 30 days, 1 year, 2 years, and so on. Every night, you go to bed knowing that your money is steadily growing.
And everyone who just lost 10% of their savings due to this market correction are feeling pretty bummed right now.
What’s a FIA?
A FIA, or Fixed Index Annuity, is a way to participate in the stock market gains without participating in the losses.
In order to do this, your gains are capped, but you can never actually go below 0% – the worst you can do is stay the same.
For example, your gains might be capped at 6%. So if the stock market goes up 10%, you only get 6%.
However, if the stock market goes down 10% – which is just did – your principal would stay exactly the same.
A FIA can be interesting for those who like the ability to make more with the stock market. You can celebrate with your friends when the market goes up, but you don’t have to sulk with them when it goes down.
A Few Strategies for Fixed Annuity Investments
If you’re thinking about putting some money into a fixed annuity, there are a few ways to go about it. However, it does depend on where you are in life.
We work mainly with seniors who are aging into Medicare, so we most commonly advise that you get your money into a safe place.
At the very least, put the majority of your money in a no-risk place.
Not retiring for quite some time?
If you’re younger than 65, you still have time to play with risk.
For example, when you’re 50, you still have about 15 years to work with before you need the security of your money for retirement.
In that case, you might put half of your money in a fixed annuity and half in riskier investments.
Have a 401(k)?
Another option that’s very common is for individuals who retire to take their 401(k) and roll that into a fixed annuity.
That is a tax exempt transfer, and you can start earning money on that sum right away.
And there you have it!
With a fixed annuity, you’d be sipping on a glass of wine, laughing at this stock market correction. OK, maybe not laughing, but at least sleeping well at night.
Contact us for a free consultation to get started.
P.S: All of our services are free, always.
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