How to Keep Your Money Safe From Stock Market Corrections
Stocks are currently taking a dip, and investors are calling this a “correction.”
A correction is a 10% drop in stocks from their last peak. And that’s exactly what we’re seeing right now – since just January 26, the S&P 500 and the Dow have fallen over 10%.
No one can see the future, and many financial experts are telling us all to stay calm. But when you lose 10% of your hard-earned money over just a few days, you might be looking for a way out.
The big secret? (It shouldn’t be a secret.) Fixed annuities.
What is a fixed annuity?
There are 2 types of fixed annuities we’d like to explain today, but we’re guessing that you want the quick, simple explanation.
In short, a fixed annuity is a way to grow your savings without taking any hits from the stock market. You heard that right – you make interest on your money with zero risk.
Zero risk, I say. Is that sinking in yet?
What’s a MYGA?
The most popular type of fixed annuity that we work with is called a MYGA. That stands for Multi-Year Guaranteed Annuity.
It’s self explanatory when we break it down.
Multi-Year means that the annuity lasts for a set number of years – the most common is 5 years.
Guaranteed means that you are guaranteed – repetitive, I know – a set interest rate for those 5 years. It’s usually a little better than 3%.
The best part of this is that you KNOW how much money you’ll have in 5 years. With the stock market, you could lose half your savings overnight! Granted, you could earn more, but there’s always that risk factor.
And everyone who just lost 10% of their savings due to this market correction are feeling pretty bummed right now.
What’s a FIA?
I know, another acronym, but this one is simple to understand, too.
FIA stands for Fixed Index Annuity.
The simple explanation is that your money participates in the stock market. The gains are capped, but so are the losses. You can never lose your principal with a FIA. The worst you can do is stay the same.
Here’s an example.
Let’s say the stock market goes up 9%. You might have a cap at 6%. So you still experience the gain, but it’s at a cap.
Now, let’s say the stock market goes down 10% – which it just did.
You go down 0%. That’s right – you lose nothing.
A lot of people like this strategy, because you still have the fun of stock market gains (you can party with your friends when it’s up), but you can sleep tight at night knowing that your hard-earned cash isn’t going to go down the drain.
Fixed Annuities Can Protect You Can Stock Market Corrections (and Crashes)
Fixed annuities are the perfect way to grow your savings without risking them to the volatility of the stock market.
There are a few strategies to consider here.
Aging into Medicare?
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.
Younger than 65?
However, if you’re younger than 65, you may not want all of your money in a fixed account. You might want to diversify a bit, because you have the time to take on 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.
Our team of dedicated, licensed agents can help you as little or as much as you need. Whether it’s answering a few questions about Medicare or creating a comprehensive Medicare Planner with you, we are your Medicare Allies.