Fixed Index Annuities are meant to provide greater financial confidence and address many of the basic retirement concerns someone has such as: tax-deferred growth, lifetime income, guarding hard-earned money, and creating a balanced portfolio.
A sound retirement income plan is like a relay race – the pieces all work together to help position you for success through each leg of the run, up to and past the retirement finish line. As part of a comprehensive strategy, fixed index annuities offer a combination of benefits that can help build, secure and sustain retirement income.
Here are six key fixed index annuity benefits that can help that retirement plan.
1) Principal Protection - A fixed index annuity is an insurance product designed to ensure continual and consistent retirement income. Funds contributed to a fixed index annuity can never be lost due to market volatility.
This can be an especially a vital benefit for individuals who are facing their golden years with trepidation about their savings and running out of money.
2) Tax Deferred Growth - Along with protection from index-decreases, most fixed index annuities also help shield money from annual taxation on interest, as long as the funds remain in the annuity. Funds held in an annuity are generally taxed as ordinary income when withdrawn. This allows a nest egg to grow tax-deferred with compounding interest through the accumulation phase, further shoring up resources for when you choose to take an income.
The benefits from a Fixed Index Annuity offers a path to jump-start retirement assets that may not be available with a non-tax deferred account.
3) Growth Opportunities - In addition to principal protection, any interest credited to a fixed index annuity is also protected. As an insurance product, a fixed index annuity is not directly invested in the market. Rather, interest is credited based on the performance of an external index such as S & P 500. Contract owners typically have the flexibility to choose among a variety of index-linked crediting strategies, many of which include a cap or participation rate. Once interest is credited, it can never be decreased due to market volatility.
4) Liquidity - Fixed index annuities offer a variety of liquidity options. Many fixed index annuities allow the owner free withdrawals up to 10%. Many annuities also offer increased or full access to the contract value for qualified care needs. Annuities vary from product to product and carrier to carrier so it is important to understand how a product works and any associated fees.
5) Guaranteed Income - Following the accumulation period, income payments can begin. These payments can be taken as a lump-sum, fixed installments over a specified period such as 20 yrs, or as guaranteed payments for the rest of the contract holder's life.
Fixed index annuities are typically intended to be long-term investments, so there may be fees for withdrawing more than the allotted penalty-free amount. But unlike variable annuities, a fixed index annuity doesn't have any associated mortality and expense fees, management fees or administrative fees.
You can also add optional riders to their fixed index annuity, such as a lifetime income benefit rider. Some riders come with no fee, and others come with an annual fee.
6) Beneficiary Payments - A fixed index annuity allows contract owners the opportunity to designate a beneficiary to receive a death benefit upon the owner’s death, instead of requiring funds be paid to the owner’s estate. This may help loved ones avoid the expense and time of probate. If a contract owner dies during the accumulation or distribution phase, the annuity guarantees direct payment to the named beneficiary. Depending on the contract, these payments may be in the form of a lump-sum, series of payments, or lifetime payments.
By design, fixed index annuities aim to protect and potentially grow money over time in order to deliver a stream of reliable income payments. For those looking for stable retirement options, a fixed index annuity can help deliver a steady stream of reliable income.
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