The Fixed indexed annuity is a booming business. There are billions annually being converted into these annuities.
Fixed indexed annuities garner higher returns than a CD or money market account without giving up security. The Fixed Indexed Annuity is an annuity that allows for market participation without downside risk , and is quickly overshadowing CD’s, mutual funds and other stocks as a great safe place for people to invest their money.
How The Fixed Indexed Annuity Works
A fixed index annuity will provide at least 1-3% returns, compounded annually. This minimum guarantee lasts throughout the contract; however, earnings can exceed this rate.
Fixed indexed annuities are linked to the performance of another equity index like the S&P 500. The overall performance of the US stock market is represented by the S&P 500. If the market performs well, your investment will enjoy a percentage of the gains. If and when the market goes down however, you are sheltered from losses.
Fixed Indexed Annuities: Gains, But Not Losses?
Fixed index annuities sound too good to be true. Well, they are real. When the market performs well, you earn a percentage of the gains subject to a cap. When the market goes down, you do not hold any of the risk and therefore do not lose any money. Every year, any earnings will be locked in at the anniversary index point. In fact, on particularly good years, a fixed index annuity can gain 2 or even 3 times the guaranteed interest rate and not lose any of those gains when the market subsides again.
Fixed Indexed Annuity: Tax Deferred Growth
The icing on the cake for fixed index annuities is that if all earnings are kept in the annuity they will grow tax deferred. You don’t even have income on a Fixed Index Annuity to pay taxes on until you take out the money.
While this product is for all ages, it is especially applicable to retirees. Small business owners are using FIAs in their 401(k) and SEP-IRA retirement plans as well.
Learn more about this on the The Annuity Report by signing up below or to the right. Or, explore these pages on Fixed Index Annuities or these pages on their popular income- rider siblings, Hybrid Annuities.