Managing Market Volatility:  Insured Annuities May Be The Answer

If you have time to wait out market fluctuations (i.e. an investment horizon of 10 years or more), a volatile stock market s no cause for concern. But if you're a retiree looking for income, current market conditions might invoke a little anxiety. Obviously, preservation of capital is a top priority. But investing solely in equities is too risky to achieve this goal. GICs are "too safe," failing to offer sufficient returns after axes and inflation are accounted for. The question then is, how can you maximize your retirement income without losing sleep over market volatility? Working with numerous clients faced with this cenario, I've discovered that investing in an insured annuity may be the answer.

The Basics

An insured annuity is a prescribed annuity and insurance policy combined into one package. The annuity provides lifetime income, taxed at preferential rates, providing enhanced after-tax cash flow compared to other fixed income products. The insurance prevents the annuity purchase from eroding your estate. After you pass on, he life insurance leaves your beneficiaries a ump sum equal to the original investment.

The Benefits

Insured annuities work for a number of reasons. First, they reduce market uncertainty. Since capital is not invested in the stock market, investors don't have to be concerned about market fluctuations. Second, they provide capital protection because insurance proceeds replace the cost of the investment. And lastly, insured annuities provide income stability. The annuity generates income for life so you won't have to worry about outliving your investments.

One thing to keep in mind about insured annuities is that you must qualify for insurance to be eligible for this plan. And once you've signed the dotted line, your capital is locked in for good.

Despite these two considerations, I still believe that insured annuities are an excellent way to secure income now and in the future. For more information on insured annuities and their impact on your financial situation, I invite you to give me a call to discuss the topic with myself and our estate and insurance advisor. I'm always happy to share my insights with you!