Principle and Interest Earned is Guaranteed Against Loss
With a Fixed Index Annuity, your principle, earned interest, and any bonus you received are contractually guaranteed to never reduce in value. This means you are guaranteed to never lose your money. This is an inherent advantage of Fixed Index Annuities over other financial instruments like stocks, bonds, mutual funds, and variable annuities. When you receive your annuity annual statement, it is guaranteed to never show a loss or less value than the year before.
Between the years 2000 and 2008, we have seen the unprecedented occurrence of the stock market losing between 40% – 50% of its value TWICE in an 8-year period. These losses devastated many individual retirement funds. However, during the same 8-year period, people who held their money in Fixed Index Annuities weathered those financial storms with zero loss of their money! While stock market participants were experiencing huge losses, the annuitants held on to all of their money!
Fixed Indexed Annuities Usually Pay a Premium Bonus
The insurance companies want your business. To provide you an incentive to purchase a Fixed Index Annuity with their company, a premium bonus is usually offered. The bonus is given to you as a deposit into your annuity account on the start date of your policy. You begin earning interest on the bonus along with your principle premium on day-one of your annuity policy.
At first glance, it would seem logical that the company that is offering the largest bonus would be the best annuity. That may or may not be true. It is important to look at the total value and benefits of the annuity to determine which product is best for you. A licensed annuity advisor can assist you in navigating through the various products that are available and help you select which annuity is best for your situation.
Your Earnings Can Be Tied to Stock Market Index Performance Without Stock Market Risk
Fixed Index Annuities are designed to allow you to safely (without risk of your principle or interest earned) participate in a portion of the upside gain of the stock market, while insulating your money from the downside risk of the stock market. When the stock market index goes up in value, you participate in a portion of the gain. When the stock market index goes down, or experiences a loss on an annual basis, your gains are locked-in and you are not burdened with any loss of your principle or previously earned interest. Many people who are weary of the constant up and down rollercoaster of the stock market, have found Fixed Index Annuities to be an extremely attractive retirement savings product.
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Premium Bonus Guaranteed For 7 Years
There is an annuity product offered that honors a 10% bonus for a 7 year period. For 7 years, you can contribute as much money as you like (up to $1 Million), and as often as you like, and every new contribution will also receive a 10% bonus. This has been a considerable benefit that many annuitants have enjoyed as it enables them to have a 401k type of savings that continues to provide matching funds.
Guaranteed Growth as Much as 10%
Many Fixed Indexed Annuities have an option called an Income Rider. They are also known as “Hybrid Annuities.” The income rider is designed to provide lifetime income, and while in its tax-deferral period, grows at a guaranteed rate every single year. Depending on the annuity, the growth can be calculated as simple or compounded interest. Usually, the insurance company allows for a growth period of 10 years or more, and in some cases, for lifetime.
The income rider provides an enormous amount of flexibility and enables you to begin or stop payments at any time you wish. This flexibility also allows you to withdraw funds or a lumps sum of cash at any time from the account value.
Due to the high rate of growth offered by the insurance companies, the account value in an income rider can double in 7 to 10 years, and quadruple in 14 to 20 years. This is extremely important for people who intend to use the money as a guaranteed income stream they cannot outlive, or are concerned with leaving an enhanced death benefit to heirs.
It’s a Myth That Fixed Indexed Annuities Tie Up All Your Money
There are some FIAs that provide 100% liquidity of your initial premium. At the minimum, most others allow access without any fees up to 10% of your accumulated value. Others allow full access if you have a medical emergency like a terminal illness, and almost all allow full access upon death. Others allow a larger percentage of access if you require nursing care.
Your Account Grows Tax Deferred
The advantage of a tax deferral is that instead of paying taxes on your earnings, the money is not taxed until funds are withdrawn. What that means to you is your money compounds more quickly because it is used to help your account value grow instead of being used to pay income taxes. The tax deferral growth results in a significant advantage as the growth is accelerated with greater earnings velocity.
Upon death of the annuity owner, some annuities have an optional feature that can enhance the account value so the beneficiaries receive more money than the annuity’s current value.
Nursing Care and Confinement Riders
Some Fixed and Fixed Indexed Annuities can provide money to pay for Nursing Care, or a Nursing Home, or both. This is an excellent benefit for people that cannot afford expensive Long Term Care Insurance premiums. Some products provide a doubling of income to help pay nursing care expenses. For example, suppose you are receiving $25,000/year as an annuity payment. If you require nursing care (even in your home), the payment can double to $50,000/year for as long as nursing care is needed. If nursing care is required for the remainder of your life, the doubling effect is guaranteed and will continue to be paid.
Ideal for Roth IRAs, SEP IRAs, and Traditional IRAs
You can transfer Roth IRAs, SEP IRAs and Traditional IRAs into an annuity without triggering any taxable event, and without any tax liability. Fixed and Fixed Index Annuities also work very well with 401k, and other retirement accounts as they continue as either tax free or tax deferred accounts.
Today’s modern annuities have many features that allow them to be customized for most retirement situations. If you are interested in learning more about how an annuity can provide you secure and guaranteed retirement income, allow us to connect you to a licensed annuity adviser in your area. If you are not ready to speak to an adviser, please use the resources here on AnnuitySeeker.com to learn more about these great retirement products.
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