There’s no better time than today to develop your retirement plan and consider options that may be suitable for your future. Read about the 5 W’s of fixed indexed annuities (FIAs) to find out if this is the right option for you. Source: NLG
What is an FIA? A fixed indexed annuity is a contract between you and an insurance company where the potential interest earned is based in part on an external benchmark index. You can choose from different types of FIAs that allow premiums to be paid in either a single lump sum or multiple payments over time.
Who should purchase an FIA? FIAs can provide guaranteed income1 in retirement and can be a smart solution for someone looking for a dependable retirement resource.
Where can I purchase a FIA? Talk to a licensed insurance agent about your interest in purchasing an FIA. Companies selling indexed annuities are required by the National Association of Insurance Commissioners (NAIC) to review every sale and ensure indexed annuities are suitable for the customer.
When is the best time to purchase a FIA? As with any retirement accumulation vehicle, the sooner you get started the better. If you already have a retirement account through work, you may want to consider an FIA as a way to diversify, because FIAs are an insurance product, and do not directly participate in any stock or equity investments.With FIAs, your principal is protected and will never decline in value due to market losses.2
Why should I purchase an FIA? FIAs can help to provide principal protection now, and guaranteed income that you can’t outlive in retirement.
1. Guarantees are dependent on the claims paying ability of the issuing company. 2. Assuming no withdrawals during the surrender charge period, and no rider charges.
A Fixed Indexed Annuity (FIA) is usually a fixed annuity whose interest is determined, at least in part, by the performance of a specified index of the market. Unlike traditional fixed annuities, the policy owner may receive zero interest for a single period on a specific premium payment if the index performs poorly. However, with most designs, the premiums are protected and guaranteed to grow over time, and the owner of a fixed indexed annuity may experience better interest crediting than a traditional fixed annuity during periods when the market performs well. Indexed annuities do not directly participate in any stock or equity investments. An investment cannot be made directly into an index. Most FIAs permit owners to participate in only a stated percentage of an increase in an index, and also impose a “cap rate” that represents the maximum annual account value percentage increase allowed to contract owners. Because they are meant for long-term accumulation, most annuities have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the annuity. In addition, withdrawals prior to age 59 ½ may be subject to a 10% Federal Tax Penalty. The guarantees of annuity contracts are contingent on the claims-paying ability of the issuing insurance company. All withdrawals made from annuities with pre-tax contributions are taxed as ordinary income. All withdrawals from an annuity purchased with non-qualified monies are taxable as ordinary income only to the extent there is a gain in the policy. This is not a solicitation of any specific annuity contract.
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