A fixed-index annuity is a financial option offered by insurance companies as an alternative investment to stocks, mutual funds, and CDs. When you invest in a fixed-index annuity, you get the attractive features of tax-deferred growth and a guarantee that you will not lose any of the money you put into the annuity, and you will also not lose the gains. Individuals who are nearing retirement may be hesitant to put their retirement savings at risk in the volatile stock market. Even those who are younger may be risk averse after the historic bear market (Oct. 2007 – Mar. 2009) that lasted for 18 months, and predictions that we may soon see another drop in the market due to global uncertainties. With mutual funds you get diversification of stocks, but that does not protect you in a declining market environment. While mutual funds are less risky than owning an individual stock, you can still lose a lot of money in a bear market environment. In the last bear market, employee 401K plans, which typically consisted of mutual funds, dropped in value by more than 30 percent. A certificate of deposit is a very safe investment, but in today's low interest rate environment, where the 10-year Treasury Bill is paying well below 3 percent, CDs are paying less than half of that amount. With a fixed-index annuity, you are usually guaranteed a minimum rate of return; and if the underlying index does well, such as the S&P 500, you can earn a substantially higher return on your investment. While you typically only receive about 75 percent of the increase over the course of your investment year, that can still make a substantial difference in your earnings for that year. You may also have a cap on the maximum amount of extra interest you can earn based on the performance of the index. Money that you cannot afford to lose should not be put at risk. A fixed-index annuity is a suitable stock market or mutual fund alternative for anyone who has the goal of preservation of capital. While a fixed index annuity is not appropriate for everyone, it does make sense for people who want to invest in the stock market at a low risk. In good markets, you will not earn as much as an index fund outside of an annuity, but in bad markets, you will still have all of your money safe. If you’re tired of gambling in the stock market and want to protect the money you have accumulated, Penny Lane Financial is here to help you evaluate other options.