Fixed Indexed Annuities: The Best of Both Worlds
Not that long ago, annuities were far simpler: Either you chose the safety of a fixed annuity, or elected to go for the riskier variable annuity. Now days, investors can choose from a far greater class of annuities — everything from immediate to deferred annuities, to book-value and market-value annuities. With such an explosion in annuity options, there’s certainly an annuity product to serve your every need, depending on your financial circumstances and goals, and, of course, your tolerance for risk. However, this breadth of options can make choosing an appropriate annuity confusing for investors.
This is where the beauty of the fixed-indexed annuity (FIA) really shines. The ultimate hybrid of the classic fixed and variable annuities, fixed-indexed annuities not only simplify the quest for the ideal product, but they’re also well-suited to meet most investors’ needs — no matter where they are in life or their financial goals. Unlike traditional fixed annuities, FIAs offer the opportunity for stock index linked growth in addition to guaranteed principal. And unlike variable annuities, the FIA is far less aggressive and carries less risk. This makes the FIA ideal for many, if not most, pre and post retirees.
While it may sound “too good to be true,” the simple fact regarding fixed-indexed annuities is that while the amount of interest earnings credited is tied to the performance of indices such as the S&P 500 or the Russell 100, the opportunity to participate in a percentage of those stock market gains is indirect. The individuals funds are never actually invested directly in the stock market, which protects them from the volatile nature of the market itself. Consequently, investors can benefit from market upswings, but should the index take a dive, their principal deposit is guaranteed never to decrease.
This appeals to a wide range of investors looking to add some security to their portfolio without sacrificing potential gains. For younger individuals who tend to be less risk-averse, an FIA can fetch as much as 60 percent of the underlying index’s performance, and if the markets take a hit, they won’t lose any of their principal, as it is guaranteed by the insurer. For older, more risk-sensitive investors, the fixed-index annuity can also play a strong role in their investment strategy. The reason is simple: Their investment is guaranteed never to decrease, while still holding the promise of a high rate of return. Some annuity companies go so far as to promise that even if the markets don’t perform well, their annuity is guaranteed to grow by a small amount annually — typically somewhere between 1 percent and 3 percent.
Fixed-indexed annuities can be an advantageous addition to any portfolio. To explore the possibilities further, the annuity specialists at AnnuityAdvantage are available to answer all of your FIA questions, free of charge. Contact us today at 1-800-239-0356, email AnnuityAdvantage at [email protected], or go to http://www.annuityadvantage.com/.