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Fixed Annuities: Why Financial Advisors Should Embrace This Bond Alternative for Stable Returns

Aaron Levitt
June 08, 2023

For many investors, bonds are supposed to represent safety. Investors understand that stocks are volatile, but bonds and other fixed income assets are supposed to be a portfolio’s anchor. But as we saw last year, that isn’t always the case. The worst return for bonds in nearly 250 years made that apparent. Financial advisors are now facing a quandary on just how to provide the steady returns that many investors crave without the volatility...

Instead, investors should treat a fixed annuity under their fixed income sleeve. Replace bonds with the fixed income annuity. This allows the fixed annuity to fully function as a buffer for portfolios and that helps to mitigate sequence-of-return risk. Research by DPL Financial Partners shows that by allocating 20% of a fixed-income allocation in a 70/30 portfolio to a fixed annuity, the success rate of not outliving your money would jump to 72%, up from about 60%.