Annuities:
Indexed Interest Potential
Benefits of Annuity Income
There are numerous advantages to receiving fixed indexed annuity income in retirement. With a fixed indexed annuity (FIA), you can protect the money you’ve worked hard to save. It also allows you to receive a reasonable rate of return** based on the success of a market index. The issuing insurance company protects your money, meaning you will not lose money if the stock market drops. However, while the market is rising, you may receive interest at a higher rate. For this reason, FIAs allow many to retire with more confidence and stability. Could it be right for you? Well, everyone’s situation is different. Reach out to us so we can discuss your retirement with you.
Crediting Method
When purchasing an FIA, you choose an index or indexes to contribute to the annuity’s value. You can also choose which crediting method to use. For example, you may select a monthly or annual crediting method. Some crediting methods take an average of value over a period of time. Others, however, base interest on the difference in rates over time. Alternatively, the crediting method could be based on the change in the index front since the first anniversary contract date.
What Affects Interest Rates
It’s important to examine the various factors that will impact the interest rate on your FIA. These include:
- The cap is a ceiling on the amount your FIA can earn during a certain period. If your chosen index rises above the cap, the cap is then used to calculate your interest instead of the index rate.
- The participation rate is used to measure your interest rate. The participation rate is typically implemented after the cap but before a spread.
- With a spread, the index deducts a percentage of interest over a certain amount of time. As an example, if the spread is 4% and the index increases by 9%, the annuity contract would get a 5% interest credit.
