If you want to make the most of your money while taking advantage of the safest options available, then a fixed indexed annuity is an excellent choice. In this post, we’ll explain what fixed indexed annuities are and why they’re a great option for retirement planning and other financial goals.
What is an annuity?
An annuity is a contract between you and an insurance company that is designed to provide a stream of payments from the insurance company to you in exchange for a lump sum of money. An annuity can be purchased with either a single premium (a large amount of money paid all at once) or monthly payments over time. The main purpose of an annuity is to help provide you with an income stream during retirement that won’t fluctuate based on market conditions and will be consistent regardless if you live 20 more years or 30 more years. An annuity provides consistent cash flow into your life, which means that it can be used as part of your retirement plan so that when the time comes, it will provide financial stability for both yourself and any dependents whom may rely on this income stream for survival during their golden years.
How are they different?
Fixed indexed annuities are different from mutual funds in that they don’t just invest in stocks. They also invest in bonds, which can provide protection from market losses and inflation. With a fixed indexed annuity, you get guaranteed minimums on your principal investment plus income from these investments. You can also add additional non-guaranteed accounts to the contract to increase your income potential. Annuities should be part of everyone’s financial portfolio because they provide an extra layer of safety and security for investors who want guaranteed returns on their money but don’t want to take on high levels of risk with large amounts invested in stocks or mutual funds.
Retirement planning and annuities.
An annuity is not a savings account or investment. In fact, it’s nothing like those things. An annuity is a contract with an insurance company that allows you to make regular deposits into the contract over time in exchange for guaranteed payments upon reaching age 65 (or other pre-determined date). The amount that you put in each month, plus annual interest credited over time, determines how much money you will receive at a future date. It’s important to note that unlike other investments such as stocks and bonds where your principal can decrease or increase based on market conditions, with an annuity your principal remains secure at all times during the accumulation process—and even when it comes time for payout! As an example: Someone who puts $500 per month into an annuity today could potentially receive nearly $1 million dollars when they turn 65 years old!
Safety of your money and interest rate.
You’ll never lose your principal. Because you’re not investing in the markets, there is a guarantee that you won’t lose money on your investment. If the market rises, yes, but if it falls? No matter what happens in market fluctuations, you can rest assured that your principal remains safe and secure. And when it comes to indexing—the process of using mathematical formulas to determine how much more or less an asset should be worth—there are many factors at play that affect how much one’s investments would go up or down. For example: inflation rates; unemployment rates; housing prices; interest rates (which affect bonds); political climate (which affects stock market volatility); foreign exchange rates; bond yields; financial regulation changes…and so on! And these are just some of the factors affecting indexing out there today! Because an FI annuity is based on fixed returns rather than fluctuating ones, these risks are eliminated entirely for those looking for fixed indexed annuities as part of their retirement strategy plan.”
You can use some of the money for current expenses if necessary, but there are some restrictions.
You can use some of the money for current expenses if necessary, but there are some restrictions. Not all annuities allow you to withdraw from your account. If a withdrawal is permitted, it will generally be tax free in a fixed indexed annuity You may also be able to withdraw funds from an optional rider (a rider is an extra feature that is added to the annuity contract). Withdrawals from a rider are generally tax free but may be subject to early withdrawal penalties if you take too much out during the first few years after purchasing the contract.
Your principal is protected from market losses.
A Fixed Indexed Annuities is a type of annuity that has a guaranteed interest rate. The interest rate is determined by the performance of an underlying index, such as the S&P 500 or the Consumer Price Index (CPI). With this type of investment, you can invest your money in the stock market and still be protected from market losses. In fact, if your investment does not perform well enough to meet its indexed rate of return, then you will receive nothing at all—and that’s a good thing! You don’t want your hard-earned cash invested in something that could lose value; it’s better to have nothing than something worthless. In other words: your principal is always safe because it cannot go down due to poor investment performance by an underlying index like the S&P 500 or CPI.
You can still get market-like growth of your money at no risk.
If you want to get market-like growth of your money at no risk, you can do that through a fixed index annuity. With this type of investment, you purchase an annuity with a fixed rate of return. This means that the value of your account will increase by a guaranteed percentage each year. However, if you’re not comfortable with investing in an annuity with only one type of return and would like to have more flexibility in how much risk you’re taking on or how quickly your money can grow, then it’s important for you to know about variable rate indexed annuities as well. These types of fixed indexed annuities allow investors to choose from different levels of risk depending on their investment goals and personal preferences.
You can avoid probate, which means your beneficiaries will receive their inheritances faster and at less cost.
Probate is the court-supervised legal process that determines how you distribute your assets to heirs. As a result, it can take months or years for them to receive their inheritances. Additionally, probate costs money—the average cost in 2017 was about $10,000—so any delays could cost you tens of thousands of dollars in fees and interest payments. But if you own a fixed indexed annuity (FIA), instead of having your assets go through probate, they’ll be distributed according to instructions contained within an insurance contract known as an owner’s policy rider (OPR). With this type of asset distribution plan in place, beneficiaries will receive their inheritances faster and at less cost than if they went through probate court proceedings. You can also use living trusts instead of wills or revocable living trusts instead of wills when planning for retirement income security and estate protection; these documents also help avoid probate court proceedings after death by specifying who should receive what upon death without requiring third parties such as lawyers or judges involved in administering estates after death
If you’re interested in finding out whether a fixed indexed annuity is a good financial vehicle for your particular situation, contact us today to schedule a no-cost, no-obligation consultation with one of our knowledgeable advisors.
If you’re interested in finding out whether a fixed indexed annuity is a good financial vehicle for your particular situation, contact us today to schedule a no-cost, no-obligation consultation with one of our knowledgeable advisors. You can call us at 623-823-1783 or click here to schedule a Zoom Meeting Consultation.
We hope this article has helped you to understand how annuities work and why they are an important part of your financial portfolio. If you have any questions or would like to speak with one of our advisors, please contact us today!