David Abreu is a financial advisor and the founder of Pacific United Financial Group.
The latest round of U.S. tariffs is doing more than reshaping trade policy—it’s sending shockwaves through global shipping, U.S. supply chains and the stock market. As ports slow, trucking layoffs mount and inflation creeps higher, the ripple effects are being felt by everyone, but especially by retirees and those approaching retirement.
If you’re within five to 10 years of retirement, the current economic landscape poses a serious question: Is your portfolio protected against a downturn?
The Tariff Fallout: What’s Happening?
Increased tariffs are essentially import taxes. They raise the cost of goods coming into the country, which can lead to higher prices on everything from groceries to electronics. But the effects don’t stop at the checkout line.
• Shipping and port activity are slowing as fewer goods arrive.
• Trucking companies are laying off workers due to reduced demand.
• Manufacturers are paying more for parts and materials, cutting into margins or forcing price hikes.
• Inflation is rising, which erodes purchasing power, especially damaging for retirees on fixed incomes.
• Stock market volatility is increasing as investors react to trade policy uncertainty.
This combination of inflation, slowing economic growth and market instability is a red flag for anyone who depends on their investments for retirement income.
The Retirement Challenge
For retirees or near-retirees, timing is everything. If you start drawing from your retirement accounts during a market downturn, you risk locking in losses and permanently reducing your nest egg’s ability to recover. This is called “sequence of returns risk,” and it’s one of the leading causes of retirees running out of money too soon.
With inflation eating away at cash and market volatility threatening growth, many people are searching for a safer way to preserve what they’ve built, while still generating income.
A Potential Solution: Fixed Indexed Annuities
One increasingly popular option is the fixed indexed annuity (FIA). While not the right fit for everyone, FIAs offer unique features designed to help protect your retirement savings from market loss while still offering growth potential.
Here’s how they work:
• Your principal is protected. You won’t lose money due to market declines.
• Your gains are linked to a market index, like the S&P 500, allowing for growth when the market performs well (subject to a cap).
• In bad years, you don’t lose a dime—you simply earn zero interest instead of suffering a loss.
• Many FIAs offer lifetime income options, turning your savings into a monthly paycheck you can’t outlive.
This combination of protection and income certainty is why many financial professionals recommend them as a foundation for a retirement plan—not a replacement for growth investments but a complement to them.
Knowing The Trade-Offs
It’s important to understand that fixed indexed annuities are contracts with insurance companies, and they come with rules.
• Caps or participation rates may limit how much interest you earn in strong market years.
• Some contracts include fees, especially for optional riders like guaranteed income or enhanced death benefits.
• Most have liquidity restrictions, which means your money is locked up for a set period (often five to 10 years), though limited penalty-free withdrawals may be allowed.
That’s why annuities are not suitable for everyone. They are ideal for those prioritizing safety, long-term income and protection from market risk, especially in today’s economic climate.
How To Decide If An FIA Is Right For You
Before purchasing an annuity, be clear about what you want from your retirement plan:
• Are you most concerned about protecting your savings from a market crash?
• Do you want guaranteed income you can’t outlive?
• How important is liquidity and access to your funds?
Once you define your goals, speak with a licensed financial professional who specializes in annuities. They can help you review multiple contracts, compare features and evaluate the financial strength of the issuing insurers.
Look for someone who doesn’t just sell annuities but helps build comprehensive retirement plans—and who can show you how an annuity fits within your broader portfolio.
Final Thoughts
The economy is shifting, and fast. From global supply chain disruptions to market volatility and inflation, today’s environment is not the same one we retired into even a decade ago. Retirees and pre-retirees cannot afford to be passive.
A fixed indexed annuity isn’t a magic bullet, but it can be a powerful tool for protecting your hard-earned savings, generating reliable income and adding peace of mind to your retirement strategy.
The information provided here is not investment, tax or financial advice. Fixed indexed annuities are long-term contracts offered by insurance companies. You should consult with a licensed professional for advice concerning your specific situation.
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