As a Certified Financial Planner© I am constantly being asked what is going to happen to bond prices if interest rates go up.  Unfortunately for many people that own bonds, if interest rates go up, the price of their bonds will go down.  As more and more people are entering retirement and looking for safe places to put their money bonds are traditionally a safe bet.  However with historically low interest rates it is more likely that interest rates will rise and bond prices will fall in the future than vice a verse.  One strategy that we are recommending is that people shift a portion of their fixed income allocation into short term Multi Year Guaranteed Fixed Annuities.  The main benefit here is that when the contract is up you can reinvest your principal plus interest from your fixed annuity into some other investment without any penalty.  Not only that but if interest rates go up you don’t have to worry about the value of your fixed annuity going down, because fixed annuities are not subject to the same price fluctuations that bonds are.

For example, you can get a 6 year fixed annuity paying 3.35% each year of the contract.  At the end of the contract you get you get all of your money back plus interest. It doesn’t matter what happens to rates.  In the meantime if you needed to access your money your could get 10% of your value each year.

Fixed annuities are a great alternative to bonds in a rising interest rate environment.  For more information visit our site, www.AnnutiyRateShopper.com or email me at ryan@annuityrateshopper.com or call me at 888-515-7152.