Fixed Index Annuities
Understanding the Indexed Annuity
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When it comes to thinking about our retirement
savings, most people would probably agree that
today’s economic conditions present challenges. With
the economy uncertain, with interest rates relatively
low, and with memories of stock market volatility
and losses still fresh in our minds, it’s no surprise that
appropriately managing our savings is of real concern.
Interest rates on some savings vehicles provide
little in the way of either current income or growth
potential. Retirees who want to see their money grow
more quickly are sometimes faced with taking on the
risk in the hope of achieving a higher yield.
In the search for greater profit, investing in stocks or
mutual funds may be unappealing to those who may
have fled investments in order to stem losses. When
stocks are going up, people are happy. But when
stock market losses and volatility reemerge, far too
many of us fail to demonstrate the staying power
required to enjoy the gains stocks may provide.
This is why getting it right with our savings dollars
is so important. If our savings portfolio is properly
structured, the likelihood of our being able to stay
with our investments longer may be increased.
This means seeking a balanced approach to our
savings, selecting savings vehicles that offer varying
degrees of liquidity versus long-term interest
accumulation potential. Plus the ability to turn
savings into guaranteed retirement income in the
future
Retirement income guarantees are subject to the claims paying ability of the issuing insurance company and the terms and conditions of the contract.
Everyone should observe the common sense approach of diversification in their investment and savings choices. Each of us should also have a portion of our savings in highly liquid vehicles such as money market accounts or three to six month CDs.
CD’s are FDIC insured up to $100,000, retirement accounts up to $250,000, and offer a fixed rate of return. They do not necessarilyprotect against a rising cost of living. The FDIC insurance on CD’s applies in the case of bank insolvency, but does not protect marketvalue. Other investments are not insured and their principal and yieldmay fluctuate with market conditions.An investment in a money market the fund is not FDIC insured orguaranteed by any other government agency. Although the fund seeksto preserve the value of your investment at $1.00 per share, it ispossible to lose money by investing in the fund.
But there’s also a place for long-term, tax advantaged
savings vehicles.
The annuity is not held for the full term. These
surrender penalties can be as high as ten percent,
or in some cases even more. A careful analysis of
your liquidity needs is critical when considering the
purchase of an indexed annuity.
Withdrawals in excess of the Surrender Charge-free withdrawal
amount will be subject to a declining Surrender Charge during the
initial term only. Withdrawals will be subject to income tax and may
be subject to a 10% IRS penalty tax if taken prior to age 59½.
Early withdrawals will reduce earnings. Some features may not be available in some states.
Savers who are willing to hold indexed annuities for their full term.