Finding Safety in a Low-Interest-Rate Environment


Finding Safety in a Low-Interest-Rate Environment

When investors think of ‘safe investments,’ they tend to think of bonds or CDs, which calculate from a pre-determined timeline and interest rates. During a low-interest-rate environment, both provide safety, but not necessarily, the returns investors are seeking. Bonds and CDs have differing benefits and risks despite being viewed by investors as ‘safe.’

A third ‘safe’ interest-bearing alternative is fixed-indexed annuities, which capture the upside of the market while protecting the principal from the downside risk. Before investing in bonds, CDs, or fixed-indexed annuities, the benefits and risks of each should be considered:

Bonds are like a loan to a government or corporation for a set period.

  • The higher the bond’s rating, the less likely of default, but pay a lower interest rate.
  • Lower rated bonds pay a higher interest rate due to their risk of default.
  • When interest rates rise, the bond’s value decreases, creating a loss to the investor when the bond is sold (interest rate risk).

CDs are an exchange of money between an investor and a financial institution. The institution pays the investor interest to use their money to borrow to its customers.

  • Are backed by FDIC up to $250,000 so that if the financial institution fails, the investor’s principal returns.
  • Are rate sensitive- when interest rates rise, the CD’s rate will not increase but remain the same through the contract?
  • Withdrawing the principal out of the CD before maturity results in a penalty the investor must pay to get their money returned.


Fixed-Indexed Annuities have characteristics of both fixed and variable annuities and are a contract between an insurance company and the purchaser. Many indexed annuities have a minimum interest guarantee, and your principal is protected from market volatility, which retirees tend to seek.

  • Your principal is protected, and you won’t lose your initial investment or accumulation.
  • Grow on a tax-deferred basis.
  • The return bases on an index (ex. The S&P 500) which grows the annuity’s value over time.
  • Provides a guaranteed lifetime income and protection against longevity risk; you receive annuity payments for life.

In today’s low-interest-rate and volatile market environment, investors seeking safety must consider how any investment fits into their investment strategy. All the above investments offer benefits to the investor. Each has its place in retirement planning, but only if suitable. As well as part of a financial strategy using other types of investments and accounts.  Investors should fully understand the risks associated with annuities before purchasing them. If you have any questions about annuities, now is an excellent time for us to visit.


Disclosure: The newsletter and links are being provided as a service to you, they are not endorsed or approved by the Social Security Office or any other Government Agency. Please note that the information and opinions included are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

Disclosure: An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax-qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Consult a tax advisor for specific information.

Disclosure: This article is not intended to provide legal advice and is for informational purposes only. This is not a comprehensive review of all features and benefits. All the material details of these/this product(s) should be reviewed prior to making a purchase decision.


In addition Behn Financial Group specializes in providing strategies for those who are seeking a better lifestyle during a low-interest-rate environment. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!