Protection Benefits of Annuities
Guaranteed* Income Protection With An Annuity
A fixed indexed annuity (FIA) comes with a number of key benefits that many other options do not. For example, unlike many stock market-based accounts, an FIA does not drop in value in the event of a market drop. It keeps your principal amount protected no matter what. However, it can offer you a reasonable rate of return** based on the performance of a market index.
This element of protection is becoming more and more important, as retirees are living longer and longer. Does the possibility of outliving your retirement savings worry you? An annuity may be an option worth considering. An FIA can offer you the possibility to secure guaranteed* income for life. Furthermore, an FIA offers more benefits, such as certain tax benefits. And, if you select an income rider, you may even be able to use it to counteract inflation.
Reasonable Rate of Return**
There’s a certain period (known as the accumulation phase) lasting several years (the specific period is outlined in your contract) during which the money you’ve put in your FIA grows, tax-deferred. During this time, the issuing insurance company keeps it protected*. Once this period ends, you can withdraw this money (this is what’s known as the distribution phase) in the form of lifetime guaranteed* income. Payments can be annually, quarterly, or monthly. This is also specified in your contract.
Calculating Your INterest Rate
The Stock Market and FIAs
An FIA does not invest directly in the stock market. Instead, the issuing insurance company uses what’s called an index. You see, the interest rate on your annuity uses a calculation based on the performance of a particular index. Your money is not, however, directly invested in the market. This way, you can earn a reasonable rate of return** when the index is up. However, you will suffer no losses when it is down.
