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 goal 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. All that being said, fixed rates look to have hit a peak very recently here in March 2023. Banks are failing and annuity rates are high. I would not hesitate to lock in these historically high fixed annuity rates right now.