Are you within 15 years of, or already in retirement?
Does the volatility of the stock market make you nervous about your retirement?
Are you concerned about outliving your money?
Annuities have a surprisingly deep, rich heritage dating back more than 2,000 years and have proven to be one of the oldest, most enduring and historically dependable financial tools ever created. Many attribute the annuity as being a financial bridge to the development of our modern world.
Annuity roots go back as far as ancient Rome where speculators sold financial instruments commonly known as 'annua.' Translated from the jargon of the times, 'annua' meant annual stipend or annual payout. Even now, over 2,000 years later, the fundamental concepts and principles from the Roman annuity continue to be a building block for the financial security of retirement programs, families, estates and individuals alike, as they protect you from market risk, inflation risk and longevity risk.
If you like the idea of never losing a penny of your hard-earned retirement dollars, while still having the upside potential of participating in market gains, a fixed index annuity is a great choice. A Fixed Indexed Annuity (FIA) gives you the potential to exceed traditional fixed interest rates by linking your interest credits to the performance of an external market index such as the S&P 500, the Dow Jones Industrial Average, or the Euro Stoxx 50 just to name a few.
If the market index rises, your money grows tax-deferred. If the market index falls, your money is protected. As the market index recovers, your money grows. Your principal and past interest credits are always protected. Keep in mind your money in the annuity is not actually invested IN the market or IN any individual stocks. The annuity only references the market index as a gauge of how to credit interest.
Popular Features of Fixed Index Annuities
Guarantees: In a Fixed Index Annuity, the value of your annuity is guaranteed to earn a minimum rate of interest. This means the owner will receive more money back than they put into the annuity if they keep the annuity throughout its complete term regardless of market index performance. In addition, some insurance companies that issue FIA’s offer a "Bonus" on the initial premium. The bonus can range from 2% up to 20% depending on the length of the contract and company. The bonus is added to the contract on day one and begins earning interest.
Liquidity: While annuities do have charges if you cancel the contract early, they also offer annual penalty-free withdrawals so you can access your money (typically 5% to 10% per year) without being exposed to any penalties.
Lifetime Income: According to the National Association of Insurance Commissioners, an annuity is the only financial product that can guarantee you a lifetime of income, no matter how long you live. Most FIA’s give you the option to purchase an Income Rider. The Income Rider helps build a monthly or annual life time income for you or your spouse. With many Income Riders, if the owner dies, the monthly or annual income may be set so that the surviving spouse continues with the life time benefit. Income Riders are optional. The average cost for Income Rider may range from .05% to 1% of the contract value and is deducted from the account’s accumulation value annually.
Other Benefits: Some annuities also offer living benefits that leverage your income if you become physically impaired with a chronic, critical or terminal illness. It’s a way to get more money right when you need it most.
To find the best Fixed Index Annuity product for your retirement, it is recommended that you compare Fixed Index Annuities from the nation’s top-rated insurance companies. Working with an independent annuity advisor will give you access to multiple products from multiple companies. Fixed Index Annuities can only be sold by properly licensed annuity agents.