A Guaranteed Retirement Payoff?

Filed in archive Retirement on August 2, 2006

One of the questions for folks nearing retirement is how to balance their desire for growth with their need to protect their nest egg. This article from Terry Savage highlights an interesting solution:

Prudential Retirement has just launched a series of Capital Guarantee Funds designed with an incredible promise: If you hold your fund until its maturity date, you will receive the highest daily value of your fund investment during that holding period -- even if the market subsequently declines!

You read correct. If your fund skyrockets but then crashes back down to earth, you'll get the amount of money you had at the highest peak. And all you have to do is keep the fund until the agreed-upon date.

I don't know how they do that, and it's unclear if Savage quite understands how they do it or if she just figures the "how" isn't as interesting as the "what".

The danger of course is that the funds will really suck and that even at their highest they'll be worse than the performance of other funds. But for those who want a little protection while still having exposure to the market, they're a very interesting option.