Learn how fixed index annuities work and provide the following benefits… safety, a reasonable rate of return, accumulation, and income you cannot outlive regardless of age.
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Retirement income and maintenance shouldn’t be something that keeps you up at night. But for many, the choices for accumulation of assets have been limited to the potential for large growth in a volatile stock market OR the paltry interest rates earned on CDs, money market funds, or low yield government bonds.
But now, with a fixed index annuity, you have a financial vehicle that offers interest credits linked to various stock market indices that provide the potential for upside growth, with none of the downside risk.
That’s right, when the market goes up, you earn a reasonable rate of return. When the market goes down, you don’t lose a penny. Your principle and all previous gains are locked in, protected, and guaranteed.
But portfolio accumulation is only part of the story. Most Americans fear outliving their retirement income account. You have probably heard the “4% rule.” Basically, it states that you should be able to take 4% out of your portfolio every year and have a 90% chance of not running out of money. That doesn’t give much comfort to retirees in a volatile market. With a fixed index annuity, you are guaranteed that your income payout will never end … regardless of how long you live.
The fixed index annuity’s lifetime income account guarantees that you can withdraw, depending upon your age, 4%, 5%, 5 & 1/2%, 6% or more and never run out of income. And if your account value is growing, there is also the opportunity of having your income payout increase. That is a guarantee!
Let’s take a look at how a fixed index annuity might just be the retirement planning and income tool that would work for you.
A fixed index annuity has 2 separate accounts: the Accumulation account, and the Income account.
Let’s refer to the Accumulation account value as your “walk away money.” This is your initial premium plus all interest credit that you have earned via a linkage to index credits. Many people are just looking for an accumulation vehicle that is tax deferred. A fixed index annuity does that in spades!
Let’s look at the other account … the Income account. The optional rider is for people who are looking for another “defined benefit” type of account – another income stream to add to their social security and pension type payments. Here is how it works:
Some fixed index annuities apply a bonus to your premium in the Income account. It also guarantees that your Income account will grow at a very competitive compound interest rate, guaranteed. PLUS, some fixed index annuities credit all index interest gains in the “account value” to your income account balance.
Is it possible that the income payment to you from the Income account could increase? The answer is “yes!” If interest credits are growing, when added to your Income account, the income base could increase. If that is the case, your income payment could increase. But, remember, the payout can never decrease … no matter how long you live!
Many people don’t want to be locked into the income payout. There might be years when they don’t need money. That is another example of the fixed index annuity’s flexibility. You can stop and start whenever you like.
Now, what about the indices that link to your fixed index annuity account value? They are household names that Americans have turned to for years.
Lifetime income and protection against loss of principal and previous gains. Protection against markets.
Seems like with a fixed index annuity, you can have your cake and eat it, too.
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