Tim Barton       Click here to email us.
ChFC, CASL, CLU

Benefits of a Fixed Index Annuity

Free Quote
Choosing the right accumulation vehicle for retirement can be difficult. With so many choices, which product will be right for you?

  • On one hand, you want the safety and guarantee of principal and credited interest.
  • On the other hand, most people prefer the potential of higher interest by being linked to the market—the return potential that a fixed-rate product cannot offer.

In the past, the choices were either (1) receive the guarantee of principle and a minimum amount of interest, or (2) link to the market with the potential of higher returns, but also accept the downside risk to your principal.

Now you can have the best of both worlds: guarantee of principal and the potential of market-linked growth with no risk of loss of principal due to market downturns. Enter the fixed index annuity concept, a concept designed to help you reach your retirement goals.

Safety and Guarantee of Principal

A fixed index annuity (also referred to as an equity indexed annuity) provides you with the best features of a traditional fixed annuity - a guarantee of principal. Unlike most securities or mutual funds where your account balance can fluctuate due to market performance, premium deposited into a fixed index annuity is guaranteed to never go down due to market downturns. A contract owner of a fixed index annuity participates in market-indexed interest without market-type loss.

The Power of Tax Deferral

All annuity values accumulate on a tax deferred basis until withdrawn. Therefore, your money can grow faster because you earn interest on dollars that would otherwise be paid as taxes. Your principal earns interest and the interest compounds allowing you to accumulate more money over a shorter period of time, thereby earning a greater return on your money.

Fixed index annuity contracts generally allow for some form of penalty-free withdrawals, up to 10% of the full accumulation value, once each contract year after the first contract anniversary.

Guaranteed Lifetime Income

Fixed index annuities can provide you with a guaranteed income stream with the purchase of a fixed index annuity. You have the ability to choose from several different annuity payment options. With nonqualified plans, a portion of each annuity payment represents a return of premium that is not taxed, which reduces the income tax on your annuity payments.

Potential of Stock Market-Linked Growth

While the index annuity concept offers many features of a traditional fixed annuity, it has a rather unique feature that allows a potential of stock market-linked interest credits without the potential of any market-type loss. In contrast to a securities-type product or mutual fund where the investor bears the market risk, the fixed index annuity concept insulates the contract owner from any risk of loss of principal due to market downturns.

What is Indexing?

Earnings on a fixed index annuity are based on stock market-like performance from certain indices. But what is indexing? Indexing is simply an investment strategy that follows the performance of select securities, such as the Standard & Poor’s 500® Index. The S&P 500® is a collection of 500 select industry leaders and thus a benchmark for U.S. Stock Market performance. A fixed index annuity is linked to the performance of this type of market index, without the risk of directly participating in stock or equity investments. With indexing, you can participate in a diversified passive investment strategy: a link to the market and its potential gains without subjecting yourself to the potential downfalls of the market.

Expectations for the Fixed Index Annuity

Fixed index annuities have the potential for market-linked interest without exposure to the market risk. Contract owners enjoy the guarantees and safety of principal even while being linked to market growth. However, they should not expect fixed index annuities to mirror the exact performance of any stock market indices.

Since a fixed index annuity uses a passive investment strategy, it will not mirror the exact return of the stock market index. The fixed index annuity is a powerful financial tool designed to meet your long-term retirement needs.

Does it sound like a Fixed Indexed Annuity might be right for you? 
Contact us today to learn more.