In the past year, Keith Singer, a CFP and owner of his own namesake wealth management shop in Boca Raton, Fla., has like everybody else pondered what is increasingly coming to look like a lost decade in the stock market. The developments of the last few months, he says, have opened his eyes to the kind of risk people are really taking on. And like everybody else, he's watched a crashing market decimate the portfolios of a lot of retirees-people who were seemingly punished for good behavior.

"It's funny, as an advisor I always felt that I'm going to make my clients more money than some capped index annuity," he says. "And for the last five years, I was right. Then in 2008, you realize that you can lose 40% of your money in one year. No matter how much money you make in the stock market, it's not real until you cash in."

In other words, it's no good unless you've got the proverbial bird in hand.

Since 2005, Singer has not only become a regular customer of both fixed annuities and fixed index annuities, but a fierce advocate. He's got 35 of his 150 clients in them, and if he had it his way, it'd be more.

And he's not alone in his sentiment. According to Beacon Research, fixed annuity sales zoomed in 2008 as investors sought a buoy in stormy markets. Sales of fixed annuities for all of 2008 were $107 billion, up 60% from the year before, says Beacon, while fourth-quarter sales were up by a fat 90%, rising to $34.1 billion from the fourth quarter of 2007.

These products, like CDs, had until recently lain for years in dormant, unexciting ridicule by investors-like something gathering mold in Tellson's Bank in A Tale of Two Cities. But annuities have become the new black, as people try to keep their kitties safe. No longer seeking outsized returns, many people have gotten religion and decided that a certain righteous austerity is in order-safety of principal with modest return.

"I think a lot of the interest [in fixed annuities] is driven by the very unique nature of this downturn," says Ted Kerr, founder and president of Kerr Financial Group, a Commonwealth affiliate in Pittsburgh. "This has affected both the bond market and the stock market, which we all know is very unusual. Normally bonds provide some form of safety when the stock market is going down, but in this particular market downturn-although bonds have not lost as much as stocks-they're off a lot and I think it's shaken people's confidence in the traditional forms of diversification."

One type of shelter is the immediate fixed annuity, which has become attractive because you toss a lump sum into it and it throws off money with interest either for a fixed period or until you die. Deferred accounts, meanwhile, hold your money away for a few years and allow the interest to grow tax-free. There are all sorts of contracts for all seasons, and the longer you hold your money in them, the more they can grow or yield more juice for you.

The bad news is that these payments generally don't keep up with inflation (though there are products you can pay extra for that do). And you can't break open the piggy-banks to get all your money back for a while without paying steep surrender charges. That means you had better not need the money for emergencies.

Kevin Hemme is a rep at the Investment Centers of America in a Porterville, Calif., branch of Bank of the Sierra. He says he had a client couple wanting to lock up their money in such a product. But before he did it, he had to poke around and find out what else they would need the money for. As it happened, they needed an extra $15,000 at some point for a new roof. "Those are the kind of warning bells that go off in my mind," Hemme says.

Moreover, if you do still believe that the ship of economy will right itself and that traditional forms of asset allocation are not dead, then you might be looking at the annuity glass half empty: Moving into a low-yielding annuity now simply means you've taken out money at the bottom of the market, locking in your losses and perhaps for years harvesting a tiny 2009-era interest rate.

Deferred fixed annuity rates are currently bouncing around the shallow 5% area. Immediate annuity rates are harder to gauge, but the internal rates of return are often figured at about 3.5%, though if it's a lifetime contract and you live longer, that goes up.

Another problem: Your annuity's security depends on the balance sheet strength of just one insurance company.

"You would want to make sure the insurance company is strong, which is hard to do today," says planner Rick Fingerman, a CFP with Financial Planning Solutions in Newton, Mass. "We thought AIG was strong, and it turned out to be otherwise."

Finding the Streams
Beacon's Jeremy Alexander admits that the rates on fixed annuities have plunged with interest rates in this environment and that they are lower than they were 10 years ago. But all is relative. In a deflationary environment, 5% could seem like a sweet bet in a few years, he says.

He also notices that there is still some business culture resistance to fixed annuities, not simply because of their illiquidity, but because they're paid for with commissions, and that rubs some planners in the fee-only channel the wrong way.

"It's not paid on an asset-based fee, so to some extent it is in and of itself sort of a managed product," he says, "so that's some of the reasons that RIAs shy away from them. It's just not very similar to their business model."

Hemme has been using fixed annuities for about 10 years, more heavily in the last six, increasing positions in them and then using the income streams to dollar-cost average back into the market. "A lot of the fixed annuities that we'reselling right now are the three- and five-year products," he says. "That's what I'm selling. The way I look at it is it's setting me up for three years down the road and it's kind of annuitizing the program so I have those assets available to do something with hopefully after this market starts creeping up again."

Singer's approach is even more aggressive, which he says reflects his clients' No. 1 goal: to not lose money. He does so by mixing a regular fixed annuity with a fixed index annuity-the latter is tied to an index such as the S&P 500 and can rise, though its performance is capped.

After putting some aside for cash, he puts half a client's money in a 5% fixed account and half in a fixed index account with a 12% cap. If the market goes sour, he still gets a 2.5% return (half the 5%). If the market does well, he can make up to 8.5% (the sum of the capped index annuity's 12% and the deferred annuity's 5%, divided by two), all without the risk of losing principal. "So I'm getting CD returns for the minimum and decent returns at a maximum without any risk," he says.

Besides his wealth management firm, Singer formed another company, Insured Returns LLC, in Boca Raton, Fla., in 2005 to sell guaranteed insurance products and makes a commission off the products.

The fixed index annuity, of course, has come under scrutiny from regulators who claim many people hawking them are insurance agents who don't understand the equities component. That battle finally led the SEC to lay down a judgment in December 2008 that the product should be considered a security and thus regulated, which would drastically change the sales landscape for this particular product. Singer thinks the agency overstepped its authority given his interpretation of the statute and he doesn't believe that it is a security. Still, others believe the product, while not in itself bad, is misunderstood the people selling it and probably in need of just the kind of oversight and transparency the SEC move might promote.

"Just logically to me," says Mark Cortazzo of MACRO Consulting Group in Parsippany, N.J., "if the interest rate is tied to an equity index-if you have no formal training in anything related to securities, how can you prove that you're able to adequately describe that product to a client?"
Though some might be skeptical of his annuity approach, Singer says that anyone who is critical of them are otherwise advocating that their clients take on more risk. The point is to preserve money. "Anyone who said that index annuities aren't going to make as much as stocks--No. 1 that's not the point and No. 2 that might not be true," he says. "I looked up different time periods for different major markets that lost more than 38% in one year. In 1930, the Dow Jones went down from 296 to 145 in one year. It didn't get back to 296 until 1954. The Nasdaq in 2000 went from about 5100 to 1750 in one year--March of 2000 to March of 2001. You know what it is eight years later? It's in the 1400s.

"At what price are you trying to get more returns," he continues. "That's the question. And getting the most return isn't people's goal. The people that I'm meeting with, their goals are, 'I don't want to lose any money and I want to get reasonable returns.' So claiming that there's a better strategy that could maybe make more return with more risk isn't what my clients need or want."