What If the S&P 500 Goes Down... and You Earn 11%?

Stock market investors are hoping for the S&P 500 to rise.

But what if there were a strategy designed to benefit when the S&P 500 finishes lower?

A newer fixed indexed annuity (FIA) crediting strategy does exactly that.

How an Inverse Trigger Strategy Works

With a traditional index strategy, you're hoping the index goes up enough to earn interest.

An inverse trigger strategy turns that idea around.

If the S&P 500 finishes below its starting value at the end of the crediting period, the strategy credits a predetermined interest rate. Currently, that rate is around 11%, depending on the carrier and product.

In simple terms:

• S&P 500 up → no interest credit from this strategy

  
  

• S&P 500 down a little → 11% interest credit

  
  

• S&P 500 down a lot → 11% interest credit

  
  

The size of the decline does not matter. The index simply needs to finish below where it started.

Why Some Investors Find It Attractive

Many retirees and pre-retirees are concerned that stock market valuations are high and future gains may be more limited than in the past.

An inverse trigger strategy gives them another way to position a portion of their retirement assets.

Instead of needing the market to rise, they can potentially benefit from a negative market environment.

For investors who believe volatility may continue, this creates an interesting alternative to traditional index-linked approaches.

Important Things to Understand

This strategy is not designed to outperform the stock market during a strong bull market.

If the S&P 500 has a positive return for the crediting period, the inverse trigger strategy earns no interest credit.

That's why many investors use it as part of a broader FIA allocation rather than putting all of their indexed money into a single strategy.

Diversification among multiple crediting strategies may help reduce reliance on any one market outcome.

The Bigger Picture

The most important takeaway is that today's fixed indexed annuities offer far more choices than they did a decade ago.

Some strategies seek gains when markets rise.

Others seek gains when markets stay within a range.

And now, some strategies can reward investors when the market finishes lower.

For retirees looking to protect principal while exploring innovative interest-crediting opportunities, an inverse trigger S&P 500 strategy may be worth a closer look.

As always, the strategy itself does not directly invest in the stock market, and guarantees are backed by the claims-paying ability of the issuing insurance company.

Serious Money Ohio Tip:

An inverse trigger strategy isn't a prediction that markets will fall. It's simply another tool that may perform well in an environment where traditional growth-oriented strategies struggle. With retirement income, having more than one way to win can be valuable.