FIXED INDEXED ANNUITY
1. WHAT TYPE OF AN ACCOUNT WOULD BE CONSIDERED "RETIREMENT PROTECTION"
Fixed Indexed Annuity. An annuity allows a customer to deposit money (premiums) with an insurance company that can earn interest and grow on a tax-deferred basis with the agreement that the insurance company will then provide a series of payments back to the customer at regular intervals. People typically purchase annuities to provide or supplement retirement income they will receive from Social Security, pension benefits, investments and other sources. You can convert your annuity into a stream of income that can then be paid over a fixed period or for your lifetime. You can take withdrawals of varying amounts when you need the income.
2. KEY BENEFITS
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Guaranteed Principal: Principal is guaranteed with a 401(k) rollover annuity, while principal is not guaranteed with mutual funds, stocks, or bonds associated with your 401(k) or IRA investment.
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Flexibility: When you roll your 401(k) plan into an IRA within a variable annuity, you have the power to change your investments depending on the investment climate or your personal goals. For example, you can select a fixed interest rate account, or have the option of splitting up your account between market indices, actively managed funds, asset allocation models and fixed interest account(s).
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Income Protection: With the best variable annuities with living benefit riders or immediate annuities with life contingencies, you cannot outlive your money. As long as you are alive, the insurance company is obligated to send you a check every month.
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Death Benefit Protection: With the top deferred variable annuities, for an additional fee (usually 0.25% to 0.75% per year), most insurance companies offer what are referred to as “Enhanced Death Benefits.” These benefits vary from 3% to 7% on either a simple interest or compounded roll-up that grow to age 80, 85 or even 90, or the highest monthly, quarterly or annual account value. A couple of companies will even lock in the highest anniversary value and then pay you 5% or 6% off of the new, higher value.
3. DISPELLING ANNUITY MYTHS:
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Annuities carry hidden fees: Depending on the type of annuity you purchase (immediate, fixed or fixed indexed), your policy could have no charges. But some annuities do have surrender charges on withdrawals taken during your surrender charge period. Some plans may offer options to take a portion surrender-penalty free. Plus, some fixed indexed annuities have additional fees with optional riders for guaranteed lifetime income, a specific growth rate, wealth transfer & healthcare. These features provide more benefits and can add more value to your policy.
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Annuities are complicated: Annuities with a guaranteed lifetime withdraw benefit work similar to Social Security or a pension. It can guarantee you a lifetime stream of income, subject to certain conditions and assuming no excess withdrawals are taken.
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Annuities are tied to the stock market, so I could lose money: With a fixed indexed annuity, your money is not invested in the market, but it provides the potential to earn interest linked to an index. So your account value will never be credited less than zero if the index decreases. Plus your account value can grow if the index increases.
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If I buy an Annuity, I don't have access to my money: Many annuities allow for penalty-free withdrawals and amounts in excess of the penalty-free amount may be subject to surrender charges. Many carriers that we use such as F&G include riders at no additional charge, that give you penalty-free access to 100% of your money if you meet certain conditions in regards to terminal illness or nursing home or home health care. These liquidity features may vary by state. Talk with your independent producer for availability about rider details.
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When I die, the insurance company keeps my remaining money: Fixed and fixed indexed annuities that haven't been annuitized have surrender charges waived if the annuitant dies. Any remaining account value is passed to the beneficiaries you names and usually avoids probate.
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I have to pay the insurance agent out of my own pocket in order to buy an annuity: You are not required to pay the insurance agent directly in order to buy an annuity. Your full premium is available to potentially earn interest from the annuity's effective date. F&G, for example, has products that are only offered through our licensed insurance producers, who are compensated through commissions which are not deducted from the premium paid for the policy.