Structured Annuities Soften Downturns
March 26, 2019 by David Hanzlik
Historically, individual investors who wanted to protect against the possibility of big market drops would boost their fixed-income allocations at the expense of equities.
While that approach has held up reasonably well in some downturns, it has not served investors as well in others — particularly the last major selloff in 2007-2008, when historical correlations broke down and bond gains didn’t come close to offsetting equity losses.
A recent research paper from S&P Global examined this period, along with the stock market crash of 2000-2002, and compared traditional equity/fixed-income allocations to an alternative de-risking option — use of risk control structured annuities that protect against dramatic market losses while providing exposure to upside index gains. These products are gaining widespread attention as more and more baby boomers begin focusing on the transition from the wealth accumulation phase of their lives to the distribution phase. Individuals nearing retirement become more cognizant of sequence of returns risk—the danger of a market downturn as they prepare to draw from their hard-earned nest egg.
Click HERE to read the full story via ThinkAdvisor.