What Are the Benefits of an Annuity?
Benefits of An FIA
Understanding the benefits of a fixed index annuity will help you to make an informed decision regarding whether or not they are the right choice for you. The products can offer index interest potential, tax deferrals, and other potential benefits that could help protect you. It’s because of those benefits of a fixed index annuity, that your retirement income could be in a safer place with an FIA.
Under the current federal income tax law, any interest accrued on your fixed index annuity contract is tax-deferred. That means you won’t have to pay ordinary income taxes on any taxable portion until you start to collect payments from your contract. Payments are taxed as ordinary income. So, if payments are taken before a retiree is 59 ½, a 10% additional federal tax or surrender charge may apply.
Indexed Interest Potential
A fixed index annuity may present a chance for potential interest growth. This is based on the changes in or more indexes. Due to potential indexed interest, fixed index annuities (FIAs) provide a custom potential for growth. Because the interest your contract occurs is tax-deferred, there is a chance it could earn assets quicker.
An FIA Can Offer Protection Benefits
One of the many benefits of an annuity is the level of protection offered by a fixed index annuity. It can benefit you in three separate ways:
Accumulation: Your principal and credited interest are protected
Legacy: One of the benefits of an annuity, like a fixed index annuity (FIA), is protection that extends beyond life. If you pass away before you start collecting payments, a fixed index annuity may help you to provide for your loved ones after you pass. In some cases, even if you pass away after you have started to receive payments from your annuity, there is a chance that they can still receive a death benefit. Your beneficiary can collect this money as one lump sum, or in payments.
Guaranteed* Income: A guaranteed* lifetime income annuity can help protect you against the risk of outliving your retirement savings. Retirement has changed in America. More and more retirees are living well into their 90’s. So what happens, if you have concerns about living past your retirement savings. A fixed index annuity might be an option because it generates a reliable stream of income that can’t be outlived. Additionally, you have multiple options to choose from in terms of how and when to withdraw your payments. Some of these options include a guaranteed* monthly check for the rest of your life.
Are Fixed Annuities Good
In Terms of Interest Rate?
A fixed index annuity’s index rate varies depending on a few key points. Insurance companies offer a variety of different insurance products all with their different advantages and choices. Depending on the company, product, and options you pick - your interest rate may vary. Here at Cornerstone Wealth Management, we only work with trusted insurance companies with a great reputation. In general, you should look for a reasonable rate of return. But it’s best to keep in mind that the insurance company is guaranteeing your earnings rate. Also, in many cases, they are providing income for life. This low-risk investment might mean you don’t see a high ROI, but it also means you don’t need to worry about losing money. You get to keep your hard-earned money safe, all while maintaining a reasonable rate of return.**
Fixed Index Annuities
and the Stock Market
So, are fixed index annuities (FIAs) a good choice for investigation? It’s important to remember that fixed index annuities (FIAs) don’t use the stock market to produce earnings. Actually, insurance companies will use what is called an “index” instead. The insurance company guarantees a minimum interest rate. That means, if the stock market tanks, it's the insurance company (not you) that is taking the risk. With a fixed index annuity, the interest rate remains steady, no matter what the stock matter is doing. If the stock market trends downwards, your fixed index annuity remains untouched.
Is a Fixed Index Annuity Right For Me?
Fixed index annuities (FIA’s) is a contract with an insurance company. You agree to place funds into the annuity. Then, the insurance company consents to pay you a fixed interest rate on that money over a certain amount of time. An example of this is a period of 10 years. The first phase is accumulation during which your money will grow. Once the waiting period ends, the payout phase begins. At this point, you can begin to receive payments, while still keeping your money safe.
Learn About Your Annuity Options
When thinking about your annuity choices, it’s important to get educated and review all your options. Are fixed indexed annuities right for you? Make the choice for yourself with the help of our experts. Just give our team at Cornerstone Wealth Management a call. We’re here to help answer your questions and guide you to make the decision that’s best for you. Learn about your options at one of our educational seminars.