Tired of your Retirement Funds Shrinking Year after Year?

As I have discussed and worked with clients to determine the suitability of a 2010 Roth conversion I have heard one question over and over again, “Where can I invest my retirement money so I stop losing principal but still get some reasonable market upside?”  That is a tall order but as I have looked at a number of investment vehicles for clients I have been very pleasantly surprised at one vehicle that seems to fit the bill.  As a class this vehicle is referred to as a deferred fixed index annuity or DFIA.  The beauty of this vehicle, which comes in a number of flavors and from a number of insurance companies, is that the principal is protected from any downside but the owner can chose to have interest credited to the account based on a number of different indexes (DJIA, FTSE, NASDAQ, etc).  For example the owner can choose to have say 35% of the account track the DJIA and the other 65% track the NASDAQ.  This allocation can be adjusted annually.  These are sophisticated products with caps and spreads and  “crediting” methods that can be chosen and changed annually.  However, the important thing is that once an amount is credited to your account the account can never go below that amount!  And in many DFIA’s there is a bonus (say 20%) that is credited to your account and grows along with your original investment and will be yours to keep as long as you leave the money in for the term of the contract (which is generally the case anyway for your retirement money).  So don’t give up on the “market” and earn nothing on your money by sitting in cash.  Instead, guarantee the principal and get some upside exposure to the market.  This way you’ll find your retirement growing over time instead of having to start over every time the market tanks.
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