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You are here: Home / Annuity Types / Fixed Index Annuities / Fixed Index Annuity Features

Fixed Index Annuity Features

What are the Features of the Fixed Index Annuity?

Fixed index annuities are loaded with innovation and features that are very unique to both the securities investment world and the fixed rate safe money world. This hybrid modern class of annuities features more of a balanced approach, combining to principal and accumulation with the inflation-hedging ability of limited stock market returns. Their strategic positioning limits their upside potential to less than the full upside of the stock market with the positive tradeoff of no loss years. Envision avoiding all losses and only stacking up gains. The potential is very tempting for some portion of your retirement portfolio.

 Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

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GROWTH, INCOME & SAFETY!

 
Index annuities were first introduced in the U.S. about 20 years ago as an alternative to mutual fund^s, allowing growth from stock market indexes with to principal in loss years. The first offerings of these annuities were readily accepted and caught on quickly. The rest is history. Cash inflows to fixed index annuities have exploded from approximately 3 billion in 1997 to over 26 billion by 2008. During the financial crisis of 2008-2009, money flowed into these annuities so fast that many carriers actually stopped taking new clients. According to the Wharton study, many fixed indexed annuities that incorporate indexing have proven (to the critics’ surprise) to give higher returns over several recent five and ten year periods of time than the index benchmarks they are crediting from.

Did you know that a fixed index annuity, index annuity, ratchet annuity or equity indexed annuity is actually and simply a fixed annuity with an optional or an extra feature? And, in addition to having a fixed interest rate choice, it also has an optional interest crediting method that uses an external market index to determine the amount of interest to be applied after a specified term of typically one year. Important things to consider when choosing a fixed indexed annuity are:

  • High independent ratings for safety concerns
  • High interest crediting for growth
  • Generous payouts for income
  • More liquidity for emergency cash needs
  • Shorter surrender periods or lower surrender penalties
  • Additional benefits such as payouts for long term care, terminal illness and death benefits
  • Flexible income riders that allow both lifetime income and the ability to pass any remaining account value to heirs
  • More indexing options for higher growth potential
  • Better indexing strategies for higher growth potential
  • Higher cap rates, higher participation, higher averaging
  • A larger bonus
  • No or low annual fees
  • Shorter vs. a longer reset to grow and protect accumulation
  • High water mark vs. annual point-to-point
  • Higher deferred growth of the income base
  • Availability of the income base for a death benefit
  • Joint survivor income **guarantees

There are many considerations that may be relative to your situation. What fixed index annuity works best for a 50-year-old single mother may be a total disaster for you and your wife. It is important to understand that no one fixed index annuity will give you everything you need or want. So, it is necessary to prioritize your needs. List all of your preferences and needs and then prioritize them on a scale of 1-10; 1 being the least concern and 10 being the greatest. Now start the process of comparing rates and options from top companies until you find the best overall fixed index annuity to address your unique situation. Utilizing a financial planner/educator can be of great value once you have familiarized yourself with the basic aspects of fixed index annuities.

Fixed Index Annuity Features and Benefits

  • Safety: Backed by highly rated state regulated insurers
  • Tax Deferral: Tax-deferred growth
  • Higher Return: Better interest rate potential than CDs and standard fixed annuities
  • Life Insurance: Death payout **guarantees
  • Liquidity: Flexible withdrawal privileges
  • Unlimited Contributions, unlike IRAs and 401(k)s
  • Inheritance: Pass money directly to heirs bypassing probate
  • Lifetime Option: Income you can’t outlive (Annuitization or a Living Benefit Rider)

Fixed Annuity with Indexing Options

[FIA, Fixed Indexed Annuity

& EIA, Equity Indexed Annuities]

  • Lump-sum or periodic contributions
  • Invested in mostly high quality A-AAA bonds
  • Annual interest crediting risk. Insurance company **guarantees principal
  • Higher rate potential based on index performance (such as S&P 500, Dow Jones, NASDAQ, etc.)
  • Moderate growth
  • 4% to 8% interest crediting potential varies with index performance
  • 3- to 14-year term normal
  • Sophisticated, greater potential
  • Guaranteed retirement income options
  • Annual fees, minimal to none

Features of Fixed Index Annuity Summary

All fixed index annuities are tax-deferred with no income tax requirement until withdrawal. This is a definite advantage over many investments like CDs, mutual fund^s, stocks and bonds when considering a long term retirement investment. A long term fixed index annuity acquisition may consistently outperform CDs, bonds and treasuries. Reinvesting money that would otherwise be paid out in tax over an extended period of years is always an advantage. In addition, fixed index annuities have several benefits that can be important for retirement planning.

Best 3 Hybrid Annuities Ad

Question: In 2009, which insurance institution had the largest volume of new fixed index annuity business?

Answer: Allianz, a 150 year old global AM Best A-rated carrier. Aviva, another A-rated global carrier, was second to Allianz.

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  ** Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Annuities are not FDIC insured and it is possible to lose money.
Annuities are insurance products that require a premium to be paid for purchase.
Annuities do not accept or receive deposits and are not to be confused with bank issued financial instruments.
During all video segments, Dick and Eric are referring to Fixed Annuities unless otherwise specified.


  *Retirement Planning and annuity purchase assistance may be provided by Eric Judy or by referral to a recommended, experienced, Fiduciary Investment Advisor in helping Annuity Guys website visitors. Dick Van Dyke semi-retired from his Investment Advisory Practice in 2012 and now focuses on this educational Annuity Guys Website. He still maintains his insurance license in good standing and assists his current clients.
Annuity Guys' vetted and recommended Fiduciary Financial Planners are required to be properly licensed in assisting clients with their annuity and retirement planning needs. (Due diligence as a client is still always necessary when working with any advisor to check their current standing.)



  # Investors should consider the investment objectives, risks, charges and expenses of a variable annuity and its underlying investment options. The current prospectus and underlying prospectuses, which are contained in the same document, provide this and other important information. Please contact an Investment Professional or the issuing Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.


  ^ Investors should consider investment objectives, risk, charges, and expenses carefully before investing. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.


  ^ Eric Judy offers advisory services through Client One Securities, LLC an Investment Advisor. Annuity Guys Ltd. and Client One Securities, LLC are not affiliated.


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