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When Is The Best Time To Buy An Annuity?

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Should I Buy An Annuity?Timing any market is difficult and the fixed interest rate market is no different. Only the most experienced (and perhaps luckiest) get it exactly right.

For the rest of us, we may not want to do all of our buying at once. It’s difficult to find the highs and lows when buying annuities.

For the purpose of this article, we’re going to discuss best practices for purchasing deferred income, indexed and fixed annuities.

We are an annuity wholesaler brokerage specializing in fixed investments; we don’t offer variable accounts. There are certain annuity buying strategies we use for our clients depending on their needs and time horizons.

Our goals is to help our clients achieve maximum growth and income. Whether you’re looking for a market low and wish to acquire an indexed product – or want to take advantage of rising rates using fixed annuities – we can help.

Use A Fixed Annuity Laddering Strategy

In today’s interest rate environment, many of our clients are interested in fixed annuity policies. Also known as MYGAs (Multi-Year Guaranteed Annuity) accounts, these products most closely resemble bank CDs.

When rates are increasing, it’s hard to know when to buy. That’s why it can be wise to use a laddering strategy. This is a strategy where you buy annuities at different times, for different terms or both.

Laddering allows for flexibility. Using this process, funds mature and become liquid again every year or so. This allows for new investments when rates are increasing. It also allows for liquidity should you need access to the principal. And owning more than one policy gives you a blended rate that smooths out yields. It also diversifies your holdings.

You may want to use shorter term annuities until rates go up. Then you can invest larger amounts for longer terms and take advantage of higher yielding cycles.

We recommend keeping an eye on treasury rates. They tell us more about the direction of fixed annuity rates than bank or corporate bond yields.

Deferred Income For Future Withdrawals

There may be no better product for creating guaranteed future income streams than deferred income annuities. The idea here is you invest a lump sum now, defer it for a period of years, then take systematic income payments in the future.

DIAs are known for their flexibility. You can defer income for a few months – or many years. And you don’t have to choose your income start date at the beginning. Most insurance companies allow owners to postpone (or accelerate) their income payments after purchase.

Typically, it’s best to lock-in a DIA when rates are high – or roll-up terms are in your favor. If rates are very low, you may want to invest in a traditional annuity, then buy your income product later. When they are high, then locking-in a competitive rate allows your annuity income to compound more quickly.

It’s also worth pointing out that many DIA policies allow for increasing income streams once your payments have begun.

When Is The Best Time To Buy An Indexed Annuity?

Annuity Laddering StrategiesThis is a product you want to time on two fronts if possible. First know that indexed annuities are built off of fixed account portfolios.

This means they offer the best potential for returns when fixed rates are higher. You’ll find more favorable spreads, caps and participation rates during higher rate cycles.

In conjunction with higher rates, you want to buy an indexed policy when markets are lower. This allows for more growth opportunity in the S&P 500, for example. So you need both working at the same time for maximum gains.

Both environments don’t always line up, but you will see them toward the end of a bear market. This is when the Federal Reserve usually starts to lower interest rates. You may also find good opportunities during random market sell-offs that don’t align with bad economic times.

Purchasing Annuities When You Want Safety

Factoring in the scenarios above, the best time to buy an annuity is also when you want safety and security. We have a lot of clients that simply want to protect a portion of their investment portfolios from downside risk.

They also want a reasonable rate of return on their money. It’s no secret that fixed annuities provide guarantees and competitive returns. They are some of the safest and most reliable accounts available. They provide stress-free places to park the money you don’t want exposed to stock and bond market fluctuations.

Contact Us To Discuss Your Investment Goals

Hyers and Associates is an independent insurance agency specializing in annuity policies. We can help you compare and contrast your best options.

Contact us today to learn more about our best annuity strategies for growth and income.

Category: Annuities