By Ford Stokes, RSSA, MBA
Registered Social Security Analyst | Series 65 Licensed Financial Advisor | Host of Retirement Results Radio Show
Introduction
For investors aged 50 and older, preserving capital, generating dependable income, and avoiding unnecessary risk are top financial priorities. In a world filled with market volatility, inflation concerns, and longer life expectancies, traditional income strategies—like relying on bonds and the outdated 4% withdrawal rule—are no longer sufficient.
A new retirement planning paradigm is gaining momentum, and it’s powered by an innovative financial vehicle: the Fixed Indexed Annuity (FIA).
Today, more pre-retirees and retirees are replacing bonds with fixed indexed annuities to reduce market risk, earn market-like returns without the losses, and create guaranteed lifetime income that grows over time. This strategic shift is backed by market data, actuarial science, and compelling studies showing the urgent need for retirement income solutions that outlast the increasing lifespans of modern retirees.
Let’s explore why fixed indexed annuities aren’t too good to be true, why they outperform bonds in today’s interest rate environment, and how they can help you outlive your money—without running out of it.
Bonds Are No Longer the Safe Haven They Once Were
For decades, bonds were a staple in retirement portfolios. They offered relatively predictable income and stability. However, today’s economic realities have eroded those benefits.
The Bond Market’s Two Biggest Risks
- Interest Rate Risk
When interest rates rise—as they have significantly in the past two years—bond prices fall. That means if you bought bonds in 2019 or 2020, you’re likely sitting on a loss. Selling those bonds today would require a discount, simply because newly issued bonds pay higher interest. - Reinvestment Risk
Bonds mature. When they do, investors must reinvest the proceeds. But what if interest rates fall again in the future? That new bond purchase could yield less income, making it harder to maintain your retirement lifestyle.
The bond market today is volatile, and yields are no longer reliable enough to cover increasing retirement income needs, especially for those seeking income for 25–30+ years.
The Longevity Risk No One Can Afford to Ignore
According to the Centers for Disease Control’s 2022 Life Tables, for a heterosexual couple both aged 65:
- There’s a 50% chance that at least one of them will live to age 90.
- A 22% chance exists for an individual to reach age 90.
- There’s a 7% chance that both spouses will live to age 90.
While living longer is a blessing, it creates a serious financial challenge: the risk of outliving your money.
Groundbreaking Longevity Research
Several respected institutions have studied the implications of increased life expectancy on retirement planning:
- The Nationwide Retirement Institute and The American College of Financial Services found that extending a retirement plan from 30 to 35 years increases the risk of depleting savings by 41%, based on historical market performance.
- With lower projected future asset returns, that risk increases by over 300%.
- The same research showed that adding just five more years to your retirement horizon increases the failure rate of the classic 4% withdrawal rule by over 40%.
These studies make one thing abundantly clear: traditional strategies don’t account for longevity risk. Investors need solutions that offer guaranteed lifetime income and growth potential—and that’s exactly where fixed indexed annuities shine.
What Is a Fixed Indexed Annuity (FIA)?
A Fixed Indexed Annuity (FIA) is a long-term, tax-deferred retirement product issued by insurance companies. It provides market-linked growth potential without exposing your principal to financial market losses.
Here’s how it works:
- Your annuity’s value is linked to the performance of a market index, such as the S&P 500, Nasdaq-100, or the BNP Paribas Global H-Factor Index.
- When the index goes up, you can participate in a percentage of that growth.
- When the index goes down, you don’t lose a penny of your principal or previous gains.
This principal protection + growth potential combination makes FIAs an ideal bond replacement—and a smart choice for pre-retirees and retirees looking to secure income without taking on market risk.
Why Replace Bonds With a Fixed Indexed Annuity?
1. Immediate Bonuses: 15%–27% Account Value Uplift
Many of today’s top-performing FIAs offer immediate account value bonuses of 15%–27%. These bonuses vest over the life of the annuity—typically 10 years—but provide a significant head start on your investment from day one.
When you’re paying for a bonus or income rider, you should receive real value. If your FIA includes a fee, make sure you’re getting both:
- A minimum of 15%–27% in account value or income account bonuses
- And a participation rate above 100% in a growth index
If you’re not getting both, you’re paying too much.
2. High Participation Rates in Market Indexes (Up to 310%)
Some fixed indexed annuities today offer up to 310% participation in leading indexes, such as the BNP Paribas Global H-Factor Index.
Let’s break that down:
- If your index grows 10% in a year, a 310% participation rate means you’d earn a 31% credited return—all without risking market losses.
- Bonds can’t do that. In fact, the average historical return on 10-year U.S. Treasuries is closer to 1.5%–2% over the last two decades.
Put simply: 3.1 times growth is far better than 1 time—and you don’t have to gamble to get it.
3. Guaranteed 7%–8% Growth on Income Account Values
Certain FIAs guarantee annual growth on your income account value—the basis for determining your lifetime withdrawal amounts.
- You could receive simple interest growth of 7% to 8% per year, regardless of market performance.
- This ensures that when you’re ready to take income, you’ll start from a higher base, meaning higher monthly checks for life.
4. Zero Market Risk = Zero Anxiety
With a FIA, your principal is never exposed to stock market losses. During volatile times—like a market crash or recession—you won’t lose sleep watching your balance shrink.
This security allows you to take consistent withdrawals and enjoy retirement with financial peace of mind.
5. Increasing Income Options to Combat Inflation
Some annuities offer increasing income riders, which raise your annual payout to help keep pace with rising living expenses.
This is critical for retirement plans lasting 30 to 35+ years, where even modest inflation can erode purchasing power.
Variable Annuities vs. Fixed Indexed Annuities: A Word of Warning
While variable annuities may sound similar, they’re not the same.
| Feature | Variable Annuity | Fixed Indexed Annuity |
|---|---|---|
| Market Risk | Yes | No |
| Annual Fees | 3%–6% | Often 0%–1.5% |
| Performance | Mutual fund returns (can lose value) | Market-linked (only gains credited) |
| Guarantees | Limited or optional | Principal protection + optional lifetime income |
With variable annuities, you’re invested in mutual funds wrapped inside an insurance contract. That means you’re exposed to both market risk and high embedded fees.
If you’re paying 3%–6% annually in fees and your mutual funds are down for the year, you lose money fast. That’s not a smart income strategy in retirement.
Why This Isn’t “Too Good to Be True”
Skeptics may wonder: how can annuities offer such impressive benefits? The answer lies in the math of today’s interest rate environment.
- The 10-year U.S. Treasury currently yields around 4.443%, which is nearly triple the 20-year average.
- This allows insurance carriers to invest more efficiently, offer higher bonuses, and provide better participation rates—all while maintaining solvency.
Unlike mutual funds or risky investments, annuity benefits are backed by major insurance carriers, many of which are rated A+ or better by AM Best.
Your Retirement Plan Must Include a Longevity-Proof Income Strategy
A secure retirement means that your Social Security income plus income from your nest egg consistently exceeds your monthly expenses—for life.
One of the best ways to achieve this is by investing in a fixed indexed annuity with a lifetime income rider, which ensures:
- Predictable monthly income
- Income for as long as you live
- Optional increasing payouts to address inflation
Combine that with a properly optimized Social Security strategy, and you can retire with confidence.
Social Security: Why Timing Your Benefit Is Crucial
When you claim your Social Security benefit has a direct impact on your long-term income security. A poorly timed decision can cost you over $100,000 in lost benefits.
As a Registered Social Security Analyst (RSSA), I help clients make informed decisions about when to take their benefit using real earnings data from SSA.gov.
My Process:
- Retrieve your XML earnings file from SSA.gov.
- Analyze your top 35 earning years.
- Run four filing scenarios with our 16-page custom report.
- Educate you on your options—including spousal, survivor, and divorced spouse benefits.
This $350 service is complimentary to my clients and radio listeners. Don’t guess when to take your benefit—get the data and guidance you need.
Let’s Build a Plan That Works for You
Annuity companies are fiercely competing for Baby Boomer dollars, and we’re seeing the most attractive fixed indexed annuity products in history. From 310% participation rates to 27% account value bonuses and 8% guaranteed income growth—it’s a great time to take advantage of the opportunities available.
Whether you’re nearing retirement or already there, it’s never too late to rethink your strategy.
Here’s How You Can Get Started:
📧 Email me directly: ford@activewealth.com
📞 Call us toll-free at: 1-888-814-0304
📍 Atlanta area: 770-685-1777
📅 Book an appointment: https://calendly.com/fordstokes
Final Word
In today’s retirement landscape, you can’t afford to rely on outdated strategies like bond ladders or the 4% withdrawal rule. The risk of running out of money is real—and growing. But the good news is, there’s a better way.
By replacing some or all of your bond portfolio with a fixed indexed annuity, you can:
- Avoid market volatility
- Earn market-linked returns without market risk
- Receive guaranteed income for life
- Protect against inflation and rising expenses
- Safeguard your financial future—no matter how long you live
Reach out today. Let’s build your custom Retirement Results Income Plan—and retire smarter, stronger, and more secure.
