The market fluctuations and challenges in recent years have placed a greater responsibility on Americans to prepare for their future. Concurrently, for many clients, it has also reduced their willingness to accept market risk.
Fixed index annuities may be a solution for clients not willing to accept risk of principal, but who are seeking the opportunity for indexed interest accumulation. Fixed index annuities (FIAs) are insurance contracts that offer many of the features of fixed annuities such as tax deferral, death benefit and retirement income, combined with the opportunity to earn interest based on changes in an external market index- without directly participating in the market. FIAs don't lose value due to market fluctuation!
However, these are long term financial vehicles and are subject to surrender charges and holding periods which vary by product and carrier. Be sure to discuss your needs and review any products before making a decision.
Potential Benefits of a Fixed Index Annuity:
- Unique features to transfer volatility risk: The annual reset feature of FIAs preserves interest earned in prior years, protecting accumulated interest from year-to-year market fluctuations.
- Additional interest potential: Like traditional annuities, FIAs typically include a fixed interest allocation and also offer the opportunity for greater interest potential through index allocations.
- The primary objective is preserving principal. This goal parallels many clients' attitude toward risk after recent market downturns. When the guarantees FIAs offer are considered, the index interest opportunity may be an appealing combination of protection and potential for a portion of your retirement assets!
Guarantees are backed by the strength and claims paying ability of the issuing insurance company. Although an external index may affect your interest credited, the contract does not directly participate in any equity or fixed income investments. Your are not buying shares in an index.