Magazine article Black Enterprise

When Guarding Your Investment Is Key: Nita Swinton Turned to a Principal-Protected Annuity to Guard against Market Losses

Magazine article Black Enterprise

When Guarding Your Investment Is Key: Nita Swinton Turned to a Principal-Protected Annuity to Guard against Market Losses

Article excerpt

Nita Swinton has found a way to lessen the sting when the stock market declines. A few years ago, Swinton became alarmed when her retirement investments began to decline sharply. The married mother of twin girls was holding some losers in her stock portfolio. She purchased Lucent at $25 and it dropped as low as $3.

"I was losing money like crazy," says Swinton, a claims representative for an insurance company in Warren, New Jersey, who lost nearly $20,000 in the stock market before switching to a principal-protected variable annuity. Her husband, Stephen, owns a graphic design company. "I was sold on this investment as soon as I found out that my initial investment was protected no matter what." she says.

Traditionally, annuities have been fixed-rate investments that guarantee a minimum return--usually 3%--or minimum monthly payment upon retirement. Recently, firms have been offering variable annuities, which have rates of return that fluctuate with the market. The downside to this is that the amount invested in the annuity declines when the stock market declines. Principal-protected annuities eliminate the risks typically associated with variable annuities. This is best for investors like Swinton who can't bear to lose any of their out-of-pocket investment.

Swinton has recently begun working with Tamara Haskins, a financial adviser at Merrill Lynch in Edison, New Jersey. "I recommended a Pacific Life principal-protected annuity for Nita because I knew she was planning for retirement and had lost a lot of money, which made her very adverse to risk," says Haskins. "The main benefit to this annuity is that you won't lose your original investment. The underlying investment of the annuity is still a mutual fund, but if you buy a mutual fund outside of an annuity, you are subject to the volatility of the market. …

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