When we retire, we hope we have a plan in place to help us continue doing the activities we already enjoy, as well as financial room to explore new curiosities and hobbies. To help us do that, we’ll need different means of accumulated capital as well as professional financial guidance to get us there.
One of the many tools you may want to consider along the way is an annuity. There are four basic kinds of annuities, each with different payout, options, and risks. Today, we’re going to highlight Fixed Index Annuities. We like to think of them as a staircase to success, because returns go up when the market goes up, but don’t go down when the market goes down 😲
A FIA has similar benefits to a fixed and a variable annuity, all in one.
Here are some key points regarding a fixed income annuity:
There is protection of your principal investment.
That’s right, no matter how the market fluctuates, you’ll never lose your initial investment to market performance.
A fixed index annuity has more opportunity for growth than a fixed annuity. You may have less returns on this product than with a variable annuity, but there’s also far less risk involved. Remember, like any tool in your financial toolbox, it’s one of many, and we would use an FIA along with others to structure your retirement plan.
As we always say, don’t put all of your eggs in one basket!
A fixed index annuity offers potential growth based on the performance of an underlying index such as the S&P 500 composite stock price index. You do not directly invest in an index, your returns are based on how an index performs subject to other crediting factors. Participation rates may change year to year and are generally lower than other indexing methods.
Some of our favorite features of a fixed indexed annuity are:
It has the advantage of being tax deferred
Because an annuity allows you to put off paying taxes on your gains until you actually withdraw, you enjoy compounded growth over time from the increasing principle in your account.
You can also secure lifetime income!
Either when you annuitize your account at no additional cost or via an optional rider to guarantee income for a single person, or for spouses if elected.
You have Flexibility!
Growth may be tied to the index performance or through a fixed interest rate earned on a fixed account or both.
With a fixed income annuity, after each term, your earnings are credited to your account. This locks in your earnings and means they can’t be affected by future downturns in the index!
We, as your Financial Advisors, are excited to help you explore this option - who wouldn’t want a secure, pension-like payout over time? Set up a time on our calendar below to discuss FIA's in more depth!