Will Fed Rate Cuts Make Fixed Annuities Less Desirable?
September 10, 2024 by Ben Mattlin
Even though a cut in the Fed’s benchmark interest rate hasn’t happened yet, the anticipation is already having an affect on some annuities, advisors say. Fixed annuities, rather than variable annuities, will feel the most direct impact, they predict.
“When the Federal Reserve lowers interest rates, the effective rates on fixed annuities will also decrease,” said Janet Fox, president of ACH Investment Group in Raleigh, N.C., and an LPL financial advisor. “As a matter of fact, we have seen some fixed annuity rates start to decrease with the anticipation of a decrease by the Federal Reserve.”
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Wink’s Moore on the Market: Scott Gaul from Prudential Financial is dead-on with his assessment of the attractiveness of annuities, despite upcoming cuts to the Fed Funds rate.
“Although decreases in interest rates can lead to lower fixed annuity rates, changes in industry sales are also dependent on the current market environment and the relative value of these products in comparison to other available solutions,” said Scott Gaul, head of individual retirement strategies at Prudential Financial in Shelton, Conn.
“For example, if a period of lower interest rates coincides with heightened equity market volatility and uncertainty, some risk-averse clients may still value the protected growth that fixed annuities can provide relative to other solutions, like CDs.”
Thanks to Ben Mattlin with Financial Advisor Magazine for the solid content. -sjm
