Discover the Benefits of Using Fixed Indexed Annuity

Discover the Benefits of Using Fixed Indexed Annuity


Most individuals fear when annuities are mentioned. They think that investing in annuities is a big risk to take. This is what most people think, especially when approaching retirement. But there are other ways one can participate in the market and also protect themselves from the market downturn. They make a contract with an insurance company, where they pay a lump sum of money to the insurance company. The company later promised to return the money with some interest. Here are several benefits of using a fixed indexed annuity.

Guaranteed Lifetime Income

A fixed indexed annuity provides an individual with a reliable source of income during their retirement. This means they offer a guaranteed income without having to monitor your portfolio. You can, therefore, get your income without worries even when you outlive your savings. This means that if you live longer than expected, you still get your regular payment income.

Principal Protection

With a fixed index annuity, your principal is well protected. This happens even when there are market downturns. Your principal will remain safe, and no matter what happens in the market, it will not be touched or changed. The company takes the invested amount to treasury bonds or corporations, which in return generate a steady income stream during the guaranteed period.

Limits on Rate of Return

The use of fixed index annuities imposes limitations on the rate of return in several ways. They use methods such as rate caps and participation rates to balance the potential for higher returns with downside protection. The partition rates usually determine the percentages of an index return that is being accredited to the Annuity account.

On the other hand, the rate caps or yields set a maximum limit on the amount that will be credited to the accumulation account. These methods work together to control possible potential gains from the markets while protecting from market downturns.

Tax-deferred Growth

When you earn during the fixed index, Annuity, you grow tax - differed. This is to say that you don't pay income taxes on the earnings before you start receiving payments or withdraw from the insurance company. 

Having fixed-indexed annuities allows you to accumulate earnings without immediate taxation. This helps your money to grow faster because you earn interest on both the principal and the interest that would have been taxed in a non-tax deferred account.

Market Participation

Fixed index annuities allow the users to take part in the market gains. They give an interest rate that is linked to a stock market index, which protects against market downturns.  They therefore provide a balance between security and growth potential.

Wrap Up

Using Fixed-indexed annuities for investment is a wise decision. It helps you to earn and get income even when you are retired. Other benefits include a guaranteed lifetime income, growth of tax-deferred, limits on rate of return, and market participation.  These benefits will help you to make an informed investment decision when choosing an index annuity.

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