Income for Life

Retiring Is Easy, Staying Retired Is Difficult.

We Help You STAY Retired.

Fixed Index Annuity Review & QuoteGet Your Quote Here
  • incomeforlife_logov2

    Retiring Is Easy, Staying Retired Is Difficult.

    Find Out How We Can Help.

  • This field is for validation purposes and should be left unchanged.

 

The fixed index annuity combines tax deferral and the potential for interest based on positive changes of an external index without actual participation in the market.

A fixed index annuity may offer a choice of indexes. The insurance company uses a crediting method to track the performance of the index(es) during a specified time period, which is typically one contract year but could be multiple contract years. At the end of each time period, the company calculates the indexed interest. If the result is positive, the annuity is credited interest up to a predetermined amount. If the result is negative, nothing happens, and the annuity’s value doesn’t decline. In addition to potential indexed interest, you may also have the option to receive fixed interest.

Like a traditional fixed annuity, under current federal income tax law, any interest earned in a fixed index annuity is tax-deferred until you begin receiving money from your contract. If you purchase a fixed index annuity with after-tax dollars, you will only pay ordinary income taxes on your interest earnings (not on premium payments) when you begin withdrawing money.

Some fixed index annuities allow you to withdraw credited interest without penalty up to a certain amount each year. However, withdrawals will reduce the contract value and the value of any protection benefits. Be aware that withdrawals in excess of the “free” amount each year and during the contract’s surrender charge period may incur a surrender charge.

Most fixed index annuities have components that help determine how much interest can be credited in a given year. The most common are:

Participation Rate. A participation rate determines what percentage of the index increase is used to calculate your indexed interest. For example, if the insurance company sets the participation rate at 80 percent, your fixed index annuity will be credited with interest based on 80 percent of any increase in the value of the external index.

Spread. The spread is a percentage that is subtracted from any increase in the value of the index during the term period. For example, if the annuity has a 4 percent spread and the index increases 10 percent, then the annuity would be credited 6 percent.

Interest Rate Cap. Some fixed index annuities set a maximum interest rate (or cap) that the contract can earn in a specified period. If the index increase exceeds the cap, the cap is used to calculate the credited interest.

A fixed index annuity is designed to provide a combination of benefits that can give you confidence in your retirement income strategy. Whether the market is up, down or flat, the fixed index annuity provides protection of your principal and any credited interest from possible market downturns and the potential for interest linked to the performance of a market index. As long as you abide by the terms of the contract, your principal is protected against market loss and any credited interest is locked in at the end of each term period and cannot be taken away as a result of a future market downturn.

Should you include a fixed index annuity in your financial plan? Get the advice you need by turning to our expert financial planner. Contact us today to get started!


 

02781ef6e2574624bcb248f9ac578c23

  • incomeforlife_logov2

    Retiring Is Easy, Staying Retired Is Difficult.

    Find Out How We Can Help.

  • This field is for validation purposes and should be left unchanged.

“By covering at least basic expenses with lifetime income annuities, retirees are able to focus on discretionary funds as a source for enjoyment.”

Source: David Babble and Craig Merrill; Wharton Financial Institutions Center; 2007.

The Index in Fixed Index Annuities

Make Financial Gains without Playing the Stock Market

Typical fixed annuities are insurance contracts that are set at a fixed interest rate for the life of the policy. While this rate helps your investment to grow, it typically does not keep up with cost of living or take advantage of when the stock market and financial investments are doing well. 

So what is the “Index”?

Instead of having just a fixed percentage of return for the entire term, fixed index annuities are calculated based on the Standard and Poor’s 500 Index (S&P 500). This value is derived from how well the stock market does, influencing the gain in this index value. The index percentage is calculated in December of each year and is based on the average monthly gain from the previous 12 months.

(Source: http://www.investopedia.com/terms/i/indexedannuity.asp)
Schedule A No Obligation Call With Matt Nelson Today!
  • incomeforlife_logov2

    Retiring Is Easy, Staying Retired Is Difficult.

    Find Out How We Can Help.

  • This field is for validation purposes and should be left unchanged.

Let’s Look at an Example:

Basic Policy Terms for This Investment

  • $1000

  • Initial investment made in January of 2013

  • Participation rate of 75%

  • Interest cap of 15% and minimum of 2%

 

End of Year

Annuity Investment Balance

S&P 500 Rate

Applied Interest Rate

2013

$1150

32.36%

15%

2014

$1268.11

13.69%

10.27%

2015

$1293.47

1.4%

2%

Project 2016

$1369.40

7.82%

5.87%

In just three years, you’ve increased your original $1000 by $369.40!

(Source: https://ycharts.com/indicators/sandp_500_total_return_annual)

 

 

Find Out MoreAbout Fixed Inxed Annuities
  • incomeforlife_logov2

    Retiring Is Easy, Staying Retired Is Difficult.

    Find Out How We Can Help.

  • This field is for validation purposes and should be left unchanged.

Act Now with Income for Life

The most important takeaway for a fixed index annuity is that you get to participate in the increased gains from the stock market while still protecting your investment from any possible downturns in the market. Talk with Matt Nelson and his team of specialists today to find out if a fixed index annuity is the right annuity addition to your retirement portfolio! Call us today!

Retiring is Easy, Staying Retired is Difficult.
We Specialize in Keeping You Retired.

Find Out MoreAbout Fixed Inxed Annuities
  • incomeforlife_logov2

    Retiring Is Easy, Staying Retired Is Difficult.

    Find Out How We Can Help.

  • This field is for validation purposes and should be left unchanged.
Speedy Fast® Retirement ReviewTop Rated National® Retirement Planning Firm
(888) 228-8814Call Today For More Retirement Product Information

Footer

Click Here to View the ArticleSee Matt Nelson Featured in The Suit

Find out what Matt has to say about making your Money last a lifetime

Call Us Today: (888) 228-8814Call Today For More Retirement Product Information
uxicached