Investing isn't easy in these uncertain times. The market crash of 2008 wiped out years of savings and unfortunately no one knows when the next market downturn will hit. A guaranteed insurance contract (GIC) can protect your life savings against these losses.
What Are Guaranteed Insurance Contracts?
They give you a way to grow your money without worrying about losses in the stock market. There are two main categories of guaranteed insurance contracts: life insurance and annuities.
With life insurance, you are buying a permanent policy that lasts your entire life because these policies build cash-value, money you can take out while you are still alive. An annuity is a type of savings contract designed to turn your savings into payments for the future, for instance, you’re receiving $500 a month for 20 years.
Life insurance gives you more access to your money before you retire. Annuities have more payout options, including ones that can guarantee payments that last for your entire life.
Types of Guaranteed Insurance Contracts
A GIC can guarantee your return in a couple of different ways. Some promise a set return for several years. This happens with a whole life insurance policy or a fixed annuity.
Another option is to set up a contract based on the stock market, where if the market goes up, you earn more, but if the market goes down, you earn less. What's nice is you won't lose money if the market goes down. You can do this with an index universal life policy or a fixed index annuity.
Now, this has been a lot of information. The right plan for your needs depends on your personal situation. If you need help comparing these different products, give us a call.
Benefit 1 – Guaranteed Return
The main benefit of a guaranteed insurance contract is that you pass off the investment risk to the insurance company. They promised you a return every year and it's up to them to make sure you receive it, even if the market goes down. They can afford to do this because they have huge reserves and can wait decades to earn their money back.
This is makes saving a lot less stressful. It's no wonder why Ben Bernanke, the former chairman of the Federal Reserve,
had most of his money in GICs when he was running the Fed.
Benefit 2 – Tax-Deferred Growth
Both life insurance and annuities delay taxes on your investment gains. This means you push back the taxes on your guaranteed earnings until you take the money out. With regular stock investments, you need to pay taxes on your gains every year. By delaying taxes on your earnings, you can build your nest egg more quickly.
Benefit 3 – Peace of Mind
When it comes to investing, it's hard not to get emotional. After all, it's your life savings on the line. But when people get emotional, they make mistakes like overselling after a downturn or chasing a winning stock.
This is a key reason why the average investor underperforms the stock market.
When you have some of your money in guarantees, you don't see the same swings, which makes it easier to make good decisions.
In these uncertain times, you don't want all your money in risky assets. By investing at least some of your portfolio in guaranteed insurance contracts, you can feel more secure about your portfolio.
Securities offered through TCM Securities, Inc. Members FINRA – SIPC. Advisory Services offered through Triumph Wealth Advisors and BluePath Capital Management.
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Annuities are generally considered long-term investments. It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies, such as medical expenses. A fixed indexed annuity is not a registered security or stock market investment and does not participate directly in any stock or equity investment or index. Annuities are not deposits of or guaranteed by any bank and are not insured by the FDIC or any other agency of the US. All guarantees are solely backed by the financial strength and claims paying ability of the issuing insurance company. With the purchase of any additional-cost riders, the contract's values will be reduced by the cost of the rider. This may result in a loss of principal and interest in any year in which the contract does not earn interest or earns interest in an amount less than the rider charge. This illustration does not take into surrender charges which may apply to early withdrawals.
Purchasing an annuity within a retirement plan that provides tax deferral under sections of the Internal Revenue Code results in no additional tax benefit.An annuity should be used to fund a qualified plan based upon the annuity's features other than tax deferral. All annuity features, risks, limitations and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan.Insurance products, including annuities, are offered through David Nicholas, a licensed insurance agent in the state of Georgia.
