Fixed Index Annuities: The Pros And Cons
January 8, 2020 by William Hinds
The older and closer to retirement you get, the less risk you should be taking in your portfolio, generally speaking. The old rule of thumb was to take your age and place that much in bonds and the rest into an equity portfolio. And over the last 30 years or so, bonds have done well in an environment with steadily declining interest rates.
Bonds and interest rates have an inverse relationship: If interest rates go up, bond prices will decrease in value, thus having the portion of your assets underperform or even have negative returns, which can’t keep up with inflation. Of course, if interest rates continue to go down, bonds would actually rise in value. This is the scenario we’ve seen over the past 30-plus years. At the time of writing this article in December 2019, the 10-Year Treasury is yielding 1.83%.
Is this still the best way to prepare for retirement today?