What Is a Fixed Index Annuity?
Saving for retirement is one of the things that a lot of people are concerned when they reach a certain age. When they reach an age when they have done all things they want in their youth, it is time to start really discussing how to save when you reach the age when working is already not an option. Choosing the most ideal accumulation vehicle can be difficult since there are so many options to consider. You want the money to be safe and that the principal you have placed will generate interest. Some people also might be thinking of accumulation vehicles that offer higher interest rates that fixed rates cannot offer. In the last few years, you have to choose one or the other, never both benefits and options. Nowadays, it is possible. With a fixed index annuity, you can get guarantee for the principle with minimum interest as well as linkages to the market that offers better interest rates. Fixed indexed annuities are a potent solution to address your needs to generate savings and at the same time, grow that money so you can reach your retirement goals.
The fixed index annuity offers the client with numerous features present in standard fixed annuities. One of which is the guarantee of principal. Compared to most mutual funds and securities where the account balance fluctuates because of market conditions, the premium that you deposit into the fixed indexed annuity is guaranteed to not go down because of the market downturns. The contract owner of the fixed index annuity will participate in interest that is market indexed but without the potential loss of market type.
Another feature of the fixed index annuity is the power for tax deferrals. All annuity values gain on the basis of tax deferral until it is withdrawn. Thus, the money can grow a lot faster since you can earn interest in dollars that could be paid as taxes in other financial instruments. The principal can gain interest and the interest will compound, helping you to accumulate more money within a shorter period of time so you can gain better returns on your money. The fixed index annuities can approve penalty free withdrawals with maximum of 10% of the accumulation value once a year, after the first contract.
The fixed index annuity can also offer lifetime income, guaranteed. The fixed indexed annuities can offer a solid income stream when you purchase fixed index annuity. You can select from numerous payment options. There are nonqualified plans in which a percentage of your annuity payment represents the return of premium that has not been taxed, minimizing the income tax on your annuity payments.
The fixed index annuity also has a unique feature to allow the potential of stock market linked interests without potential losses from the market type. The fixed index annuities have an insulating feature that protects the client from any losses in the principal when the market suddenly changes.
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