Annuities
Indexed Interest Potential
Benefits of Fixed Indexed Annuities
A fixed indexed annuity, or FIA, may be the cornerstone to a successful long-term retirement strategy. Here are some of the key benefits of fixed indexed annuities:
Stability
FIAs provide steady payments based on the performance of an index or indexes, such as the S&P 500. FIAs are protected against principal loss in the event of a stock market drop. Yet still, allow for potential gains when the market is up, getting you reasonable rates of return over time. Unlike many other financial vehicles, which are at the mercy of the ups and downs of the market completely, an FIA can offer the “best of both worlds.”
Crediting Method
Another benefit of fixed indexed annuities is the flexibility in terms of your crediting method. Your insurer determines how much indexed interest you will get, based on a few rules and factors. Additionally, it is possible to choose to have credit applies annually, or monthly. Some crediting methods use the average value over a certain time period. Others, meanwhile, base their interest on the differences in rates. Another crediting method shows the changes in the index since the start of the FIA contract’s start date, and determines the interest based on that change a year later.
Protection
A significant benefit of fixed indexed annuities is the ability to keep your money safe. In the event of a market downturn, your principal is protected. The insurance company’s claims-paying ability backs this guarantee.
Interest From Fixed Indexed Annuities
To start, let’s talk about how FIA interest rates are determined. First, your annuity is aligned with at least one index. We can help you with this process. When you are using multiple indexes, there are several options for interest rates. The issuing insurance company will then use one of the aforementioned crediting methods to track the performance of your index or indexes.
Whenever the rate exceeds a certain point, you will receive indexed interest earnings. Additionally, these earnings will remain protected if the index goes down. Everyone’s financial situation is different. Therefore, everyone’s financial strategy should be different. You have your own goals and needs for retirement, and we can help you meet them. Reach out to our team. You can schedule a one-on-one meeting with us, or, you could attend one of our educational seminar events. We can help educate you on the benefits of fixed indexed annuities.
Here are the factors that may potentially impact the interest rate on your FIA:
FIAs earn a maximum rate of interest, or CAP, in certain circumstances. A CAP typically lasts for a month or up to a year. If your selected index exceeds the cap, then the interest rate does not apply.
The participation rate is calculated after the CAP. Essentially, only a percentage of the increase in the index sets your rate, not the full increase.
With a spread, the index deducts a percentage of interest as time passes. For example, let’s say that the annuity spread increases by 4%, and the indexed increases by 9%. In that case, the annuity would receive a credit of 5% indexed interest.