Understanding investments can be difficult.
With confusing terms and conditions — not to mention dealing with brokers who entice you with promises of riches only to see themselves get richer — the world of investing can be perplexing to say the least.
How do you know which investments are right for you? At Tactical Wealth, we want to help educate you on what you need to know before you dive into these choppy investment waters.
While you may have heard tales of glory from Wall Street, the brutal truth is that there is no real way to predict how the market will look 20, 10, or even five years from now. That’s why many savvy investors counterbalance their riskier holdings with things like annuities and bonds.
But when it comes to understanding annuities, many beginning investors don’t know what these stable income-generators entail.
In this blog, we’ll be covering some of the pros — and cons — of one specific type of annuity: fixed income annuities.
Fixed income annuities are a common choice among those looking for steady income in retirement, or even those who are looking to supplement their more risky investments.
The word “fixed” means that the rates of these annuities never change — whether it’s a one-year or a 30-year note, your money will always grow at the same rate.
This can be advantageous, and even life-changing, for many — are you among those who can benefit from fixed income annuities?
Keep reading to find out and get your free fixed income report from Tactical Wealth today.
Understanding Fixed Annuities
Before diving into the pros and cons of fixed annuities, we must first understand the basics. With most annuities, a lump sum payment (also known as your principal investment) is made to an insurance company.
The insurance company then returns the investment through a series of interest payments — it could be monthly, quarterly, annually, or some other previously agreed upon interval — for a set period of time.
Fixed annuities are great ways to earn stable, consistent income for a set period of time — whether one year, 10 years, or longer.
Fixed annuities are great for those preparing for retirement, but in reality anyone can benefit from these investments.
Pros Of Fixed Annuities
As mentioned above, one of the biggest draws of fixed income annuities is the fact that you can earn stable, consistent income for a long period of time. That means long enough to where you won’t outlive your retirement savings — which is a common worry among new retirees.
Additional perks of fixed income annuities include:
- Protected Investment: With annuities, you are always guaranteed to at the very least receive your principal investment. That means your money won’t be lost to the “machine” of the volatile stock market.
- Tax Savings: Many investors choose to group annuities in with their retirement accounts, such as a 401K or IRA. This allows them to roll-over funds without tax penalties.
- Stable Income: Of course, arguably the most attractive aspect is the fact that you receive a set payment each and every month. This allows you to supplement or supplant income and rely on a certain budget. Talk about peace of mind.
Cons Of Fixed Annuities
While these types of fixed investments offer many perks, there are also some certain drawbacks that give investors pause. Among the negatives associated with annuities are:
- Low Returns: Sure, fixed annuities pay back interest at the same rate every month. However, that rate is typically quite low. This means your gains will be fairly negligible, particularly for a short-term annuity.
- High Fees: We mentioned above that many brokers promise that you will see your money grow exponentially. All the while, they are really just lining their own pockets with commissions, management fees, and investor fees. These fees tend to take a big bite out of your returns.
- No Flexibility: Once you pay your principal investment, you are tied to that insurance company for as long as your investment lasts. There are withdrawal penalties, fees, and other obstacles that keep your money tied up.
All The Perks, None Of The Hassles
Wouldn’t it be nice to invest in fixed income annuities with all of the “pros” and none of the “cons?” Now you can.
The Tactical Wealth fixed income fund is comparable to fixed annuities, only our offering features higher rates, more flexibility, and best of all no fees.
How do we do it? Rather than investing in the stock market or stubborn insurance companies, our fund purchases mortgage and trust deed loans in historically stable markets.
That allows the fixed income fund to pay out higher interest payments — as high as 4.75 percent for a 10-year note — all without the dreaded management fees and commissions you find with other annuities.
Check out our fixed annuity rates comparison and see why the fixed income fund is your answer to a better investment.