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Life Health > Annuities > Fixed Annuities

The Reallocation Factor Can Increase a Client's Yield

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What You Need to Know

  • Your clients should diversify.
  • They should also stay flexible.
  • One way to reconcile those goals is to use an annuity with a fixed point-to-point index crediting method.


“Position yourself as safe as possible during bear markets.”

“Don’t lock yourself into one strategy during a period of market volatility — you must be able to adjust your plan periodically based on the current market conditions.”

These are all things retirees hear every day. And they’re all great advice.

Unfortunately, many aren’t hearing “the rest of the story,” as Paul Harvey used to say.

Enter: The Reallocation Factor.

Here’s the truth.

Anyone working with those in retirement or planning for retirement needs to be aware of the power of reallocation in a fixed point-to-point index crediting product.

This type of product can tick all the boxes of expert advice we discussed earlier.

The Rest of the Story.

In a fixed indexed annuity, using the point-to-point crediting product, the account is shielded from losses regardless of what happens in the selected indexes.

This is especially important for those nearing retirement, due to the lack of time they would have to recuperate any losses.

Most people don’t realize that recouping a 30% loss takes a 42% gain.

And that’s only if they’re not taking withdrawals simultaneously.

This takes care of the advice to protect yourself during down markets.


The rest of our expert advice can be satisfied by reallocation.

This means being able to change course when you see a storm coming.

It also means not locking yourself into one strategy for an extended period.

It means you can diversify in different fixed and indexed “buckets” based upon rates and market conditions at specified times (typically annually).

Most point-to-point fixed indexed annuities can change the strategies periodically (typically annually) to match allocation updates.

Suppose your client believes the market is in for a downturn.

In that case, they could choose a fixed growth amount for the next period, knowing they can change that to a market indexed growth amount at their next reallocation point.

Or, suppose that they believe the market is doing well and will for the next period.

In that case, they could allocate their funds to a market index for a much greater chance for growth, knowing they could always go back to the fixed “bucket” next time.

Or they could do a mixture of the two options and create their own hybrid solution.

The choice is 100% theirs with The Reallocation Factor.

And with fixed products, you know that no matter what they choose, there will never be any losses to their principal.

And that once the gains are credited at the end of every period, they are locked in and can never be lost.

And that a majority of these products have no fees at all.

The Bottom Line

Following the advice of experts can be great, once you know “the rest of the story.”

Tim Wood (Photo: Wood)Tim Wood is a founder and broker at Safe Money Retirement.




(Image: Thinkstock)


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