Everyone’s talkin’ annuities these days, with pre-retirees asking for lifetime income options and investment insiders anticipating an imminent stock market downturn.
And now industry expert and acclaimed academic Dr. Wade Pfau is weighing in (again).
In a recent white paper, Pfau, Ph.D., CFA, touts the benefits of padding portfolios with fixed-indexed annuities.
“By managing downside risks through a more structured approach that prevents negative market returns, a fixed-indexed annuity may allow for greater wealth accumulation at lower percentiles of the distribution of outcomes when markets perform poorly,” he explains in the paper titled Managing Risk with Fixed-Indexed Annuities.
“This can better set the stage for retirement and generate more lifetime retirement income from a given asset base.”
The retirement researcher calls attention to Great American Life’s Index Protector 7, in particular—a fee-based fixed-index product that was introduced in 2016, which he recommends adding to diversify traditional stocks- and bonds-based portfolios.
“The fixed-indexed annuity offers four different indexed strategies, which all provide downside protection with a 0 percent floor on returns, while allowing for some participation in the market upside through indices linked to the stock market or exchange-traded fund,” Pfau writes with regard to the Great American offering.
“It may serve as a suitable replacement for bonds or other asset classes with a low correlation to the stock market within an accumulation portfolio,” he adds.
For advisors who are frustrated in the face of the current low-interest rate environment, it’s a solution worth considering.
“Not only are advisors navigating lower fixed income returns, but also an equity market that’s approaching all-time highs. This combination has many advisors looking for alternative solutions to help clients generate higher returns without taking on too much risk,” Tony Compton, Great American Life divisional vice president of B/D and RIA Sales, said in a statement. “We’re honored to have an esteemed expert like Dr. Pfau recognize how our product can help fulfill the need.”
SEE ALSO:
- What’s Your 401(k) Plan’s Retirement Income Philosophy?
- 9 Issues 401ks May Face in 2019—And What to Do About Them
- 403b Plan Sponsors (Really) Generous With Employer Contributions
Jessica Claeys is an editor, writer, and graphic designer, who has been creating both print and digital marketing and communications content for 10+ years.
Jessa Claeys is a licensed insurance producer in the state of Colorado and an insurance editor for Bankrate. She currently covers auto, home and life insurance with the goal of helping others secure a healthy financial future. Jessa has over a decade of experience writing, editing and leading teams of content creators. Her work has been published by several insurance, personal finance and investment-focused publications, including BiggerPockets, 401(k) Specialist, BP Wealth and more.