Indexed Interest Potential

Fixed Index Annuity

What is an Indexed Annuity?

You might assume that the annuity has no flexibility based on its name.  In contrast, a fixed index annuity (FIA)  offers many options to choose from. You may be able to choose your preferred index, for instance. You can participate in an external index even though you do not purchase stocks or funds.

The interest on your fixed index annuity would increase based on changes in the index you select.

Depending on your annuity, you may be able to select how much to connect with specific indexes. What is an indexed annuity? Continue to read for details.

A Fixed Index Annuity Offers Retirees Several Benefits

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The option to choose the crediting method is another benefit of a fixed index annuity.  This means that the insurance company must follow certain timeframes and rules when calculating index interests. Choosing a monthly or annual crediting method, for example, is an option. Further, depending on the indexes selected for crediting, you may see an increase in the interest on your fixed index annuity for a particular period. Some calculate their interest based on the differences in rates for the same period. You may also have a fixed index annuity (FIA) whose index value is determined based on the date you signed the contract.  So, it is calculated every year on the same day. 

Keeping Your Savings Safe

The most important benefit is the safety of your money. No matter what happens to the index, you won’t lose money. The law requires insurance companies to protect your money. As a result, you can benefit when your index performs well. Additionally, your insurer protects you against losses. Insurers set the interest rate at a reasonable rate of return over time. By doing this, you will prevent your retirement savings from being affected by market changes. The knowledge that they will not outlive their retirement savings is reassuring for many retirees.

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How Can Fixed Index Annuities Grow?

Organize your annuity to align with at least one index. You won’t have to worry about the process as much as you think. The team at Sadie Sicka will walk you through every step. Several interest-rate options are available to you. Then, the insurance companies track how well the chosen index(es) are doing using a crediting method. The policy provider sets the interest rate at the end of the year as the final step.

When rates rise above a certain level, you earn indexed interest. If the index falls, the value of your annuity will not change. Additionally, participation rates, caps, and spreads can all affect the interest rate. Each situation is different. As a result, annuities will differ depending on one’s choices. You can attend one of our seminars to learn more about fixed index annuities.  It is important to consider retirement choices carefully. Don’t hesitate to ask as many questions as you need to.

Factors That Affect Interest Rates?

Understanding annuities is crucial to your retirement planning. It is important to consider many factors when choosing the crediting method for your annuity.

It is possible for a fixed index annuity to earn a maximum amount of interest. An annual or monthly cap usually applies. When the selected index is above the cap, the interest rate is not based on the index rate. The insurance company calculates your interest based on the cap rate.

Participation rates are implemented in some fixed index annuities (FIAs). This means that a participation rate will be used to determine the amount of index increase to be applied to your indexed interest rate. A cap is usually followed by a spread.

The indexed interest is often calculated based on a spread. Index gains are subtracted from an amount in a given period. As an example, the spread on annuities is 4% while the index grew by 9%. The contract would be credited with 5% indexed interest in this case.

Contact us to learn, “What is an indexed annuity”? and the options best suited for your needs.

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