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Goldstone Financial Group – Are Annuities (SPIAs) Okay When Interest Rates Are Low?

Goldstone Financial Group - Are Annuities (SPIAs) Okay When Interest Rates Are Low?

Investment options can be incredibly daunting, but annuities offer many retirees a safer alternative to the volatility of stock exchanges and other vehicles. But with the current low-interest environment that exists around the world, concerns have been raised about whether these fixed-income products, more specifically known as single premium immediate annuities (SPIAs), are still an appropriate option for those looking to form a robust retirement portfolio. In this article, Goldstone Financial Group takes an in-depth look at SPIAs, investigating their advantages and disadvantages amidst record-low interest rates so you can decide if they’re a safe fit for your financial needs.

Are Annuities (SPIAs) Okay When Interest Rates Are Low? Goldstone Financial Group Answers

According to Goldstone Financial Group, when interest rates are low, many people wonder whether it is still a good idea to invest in an annuity (also known as a single premium immediate annuity or SPIA). The short answer is yes, annuities can be a great retirement savings tool even in an environment with low-interest rates.

The key thing to understand when assessing the potential benefits of investing in an SPIA during lower-interest rate environments is that these types of annuities have two main components – the expected yield and the insurance company’s guarantee on your principal. While you may not receive as much income from your SPIA when compared to higher-interest rate environments, you will still enjoy steady payments for life and the peace of mind of the insurance company’s guarantee.

In addition to the steady income provided by an SPIA, the security of knowing that your principal investment will not decline in value makes it a great option even when interest rates are low. For example, consider an investor who invests $100,000 in an SPIA at age 65 with current 10-year Treasury yield rates of 0.60%. Their SPIA would offer an expected yield of 4.00% which could provide them with approximately $4,000 annually for life. They also have the assurance that their principal is guaranteed no matter what happens in the markets, and they can rest easy knowing their money will last as long as they do.

Another advantage to investing in an SPIA during low-interest rate environments is that annuity payments are often higher than what is offered by other investment options such as bonds. For instance, a 10-year Treasury bond may offer a yield of around 0.60%, while the same investor investing in an SPIA could receive up to 4.00%. That’s almost seven times more income for their retirement savings!

Finally, investing in an SPIA, as per Goldstone Financial Group, can be an effective way to manage longevity risk since you have the assurance that your principal and future payments will remain consistent throughout the life of the contract, no matter how long you live. This makes it an ideal choice for those who are looking for assurance that they will not outlive their savings.

Goldstone Financial Group’s Concluding Thoughts

In conclusion, choosing to purchase an SPIA is a personal decision and one that depends on an individual’s financial situation, risk tolerance, and future plans. For some people, these annuities may be suitable given the current low-interest rate environment; for others, the potential return might not make them viable investments. As always, it’s important, as per Goldstone Financial Group, to do your research, so you have all the facts when considering such an important financial step. Consider seeking professional advice from a trusted financial advisor for more advanced investors or a long-term planner if you plan to keep your money in the annuity for many years. Last but not least, read up on any guarantees involved with SPIAs and determine if they suit your needs. By weighing these factors carefully against each other, you can make an informed decision about whether purchasing SPIAs is right for your financial future or not.