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Fixed Index Annuities: Right for Your Retirement Plan?
Looking for a smart way to invest for retirement? 4 reasons a fixed index annuity may be just the ticket.
Investing can sometimes feel like a daunting challenge. The unpredictable economy and big swings in the stock market in the past 15 years make some potential investors worry about losing their hard-earned money when they’re trying to grow it, protect it or make it last through retirement.
Fixed index annuities (FIAs) may be a good choice for retirees seeking a less tumultuous investment with some upside potential. This type of annuity – essentially a contract between you and an insurance company – may pay a minimum rate of interest for a fixed number of years, or a non-guaranteed (and potentially higher) return based on the percentage change in value of a broad stock index, such as the S&P 500.
Here are 4 smart reasons to consider including a fixed index annuity as part of your retirement portfolio:
1. Your returns are locked in annually – guaranteed
A fixed index annuity is called “fixed” because it provides guarantees. It may apply to a rate of interest over a fixed number of years. Or it may mean that the principal is protected regardless of interest rates or negative returns on the market index the FIA returns are linked to.
Once earned, gains are locked in. Investors have the potential to benefit from economic upturns while remaining unharmed by downturns and locking in prior gains.
“This makes fixed index annuities a safe haven for retirees to park their assets and get a decent return without loss. We love to win, by not losing,” says Jeff Vogan, owner of Premiere Retirement Planning, Tuscon, Ariz.
2. Growth for income is also guaranteed
The new generation of FIAs also has added an optional feature often called an income rider that grows at a very competitive guaranteed rate. The annual rate can be up to 6 percent and continue to compound for up to 10 or sometimes 20 years depending on when a person wants to turn on the lifetime income or withdrawal benefit.
While the actual account value may grow at a different rate, due to index performance, the income account value is guaranteed to grow so long as it is used for lifetime income.
3. You’re protected from retirement ‘What Ifs’
Worried about outliving your money? Are your health care expenses rising? Concerned that you may need more income in the years ahead? An FIA can provide a Guaranteed Lifetime Withdrawal Benefits, giving you a stream of guaranteed lifetime income that you can’t outlive.
It also offers more flexibility than just a monthly paycheck. “Old School” annuities, according to Vogan, “would typically lock you in as soon as you elected income and give you no other options to access your money in the account if something came up later.”
Before locking in the income benefit on the new generation FIAs, funds may be withdrawn as needed up to a certain amount without forfeiting the future benefit and without penalty.
Once the benefit is started, the annuitant will receive guaranteed income payments for life even if the account balance falls to zero. So no worries about outliving your money on this account. But “if you need your remaining account values for medical reasons like nursing home or terminal illness, you can still access the balance of your account,” Vogan explains.
4. Your money lives on
In addition to income riders, the new generation of FIAs offers a protected inheritance benefit. If any account value is left when the owner dies, the remaining balance will transfer to the heirs. With most traditional annuities the lifetime payout would end upon death and the remaining balance would go to the insurance company.
“The new way seems so much more fair to today’s retirees. It’s kind of like you get to have your cake and eat it, too,” says Vogan.
If you are ready to start focusing on your retirement income and investment strategies, it makes sense to get advice from an experienced retirement focused advisor. You can receive a no obligation complimentary and comprehensive review from a Registered Financial Consultant at Premiere Retirement Planning with offices in Tucson and Mesa, Arizona.
For over 20 years, Jeff Vogan and his team have helped retirees plan for financially comfortable retirement years without the risk of losing money or outliving investments.
Insurance and annuity products are not sold through Horter Investment Management, LLC (“Horter”). Horter does not endorse any annuity or insurance products nor does it guarantee their performance. Owners of these products are subject to the terms and conditions of the policies and contracts of the issuing companies. All product guarantees depend on the insurance company’s financial strength and claims-paying ability.