The benefits of fixed indexed annuities attract investors of all ages, incomes, and risk tolerances. They’re low risk and offer an additional savings tool to individuals who have maxed out their retirement savings with regular contributions.. If you’re unfamiliar with the product, when you buy an FIA, you’ll sign an annuity contract with an insurance company that will guarantee your money will build over time and never be lost. You’ll receive an income in retirement, and your contract will provide a death benefit.
Alloy Wealth Management often recommends FIAs as part of a balanced portfolio because of their potential for growth and the protection they offer. They are not a stock market investment. Growth is based on a market index so your money will never be affected by market downturns. You’ll earn pre-determined gains every year, and your contract will be protected by the insurance company backing the annuity. There are a few downsides to this long-term investment option, but the benefits far outweigh them.
- There is a potential for growth, but growth isn’t guaranteed. When the index increases, you will receive a portion of the increase and when it decreases your contract value stays the same.
- FIAs have a cap rate set by the insurance company. If the cap rate maximum is 5%, you will only earn 5% interest on any increase of the index, even if it realizes a 10% gain.
- There’s also a participation rate that can vary by term. Most annuities have an 80% to 90% participation rate but may offer a 100% rate for 12-months. The participation rate will determine the amount of interest paid to your account when an index increases. Insurance companies are in business to make money.
If you have questions about fixed indexed annuities, don’t hesitate to contact Alloy Wealth Management. Insurance has come a long way, but it still provides one of the most tax-advantaged methods to transfer wealth. Whether you’re looking for another savings option or income in retirement, call 800-689-3935 to speak with one of our advisors.