FOXBusiness – What Rising Interest Rates Mean for Annuities
The following are excerpts from a FOXBusiness article titled, “What Rising Interest Rates Mean for Annuities,” by Casey Dowd.
“Annuities can serve to be an important leg in your retirement portfolio no matter what the current interest rates are. It is difficult to determine the perfect time to invest in an annuity, but with a projected hike in rates, it might be a good time to weigh the option.
Ken Nuss, CEO of AnnuityAdvantage, discussed with FOX Business what you need to know about rising interest rates’ impact on annuities, and how to create a guaranteed lifetime income stream.
Boomer: How do higher interest rates impact the value of annuities?
Nuss: The value of an existing, already issued fixed-rate annuity is not impacted when interest rates rise. The annuity value is determined by the initial deposit premium and accumulated interest earnings not yet withdrawn, compounding at a pre-determined interest rate for a set period of time, typically 3-10 years; all of which is contractually guaranteed by the issuing insurance company.
Boomer: Given the current interest rate environment and outlook, would this be the right time to buy one?
Nuss: This is a question we hear often. In fact, it is a question we have heard often for nearly a decade. The problem with waiting for interest rates to rise is that no one knows for sure when rising rates will occur, how high they will go, and if those higher rates will be sustained or if they will fall back down.
Meanwhile, there are countless numbers of investors sitting on the sidelines, waiting for higher interest rates to develop, with their money parked in extremely low interest bearing savings and money market accounts, and they have been doing this for years.
For those individuals that still feel uncomfortable locking in today’s interest rates, we recommend a strategy of half now and half later. Take the funds that are being considered for fixed-rate annuities and commit half those funds now at today’s rates, holding the other half back in hopes of higher rates in the near future.
Boomer: Can you discuss some of the pros and cons of fixed indexed?
Nuss: Fixed indexed annuities are...”
To continue reading the full article, simply follow this link: https://www.foxbusiness.com/features/what-rising-interest-rates-mean-for-annuities