Fixed index annuities
Fixed index annuities provide a retirement planning solution with upside potential, but do not put their premium at risk.
• Fixed Index Annuities
• Fixed Annuities
• MUlti-Year Guranteed Annuities
Fixed index annuities, or FIAs, are a contract between you and an the insurance company that may help you reach your long-term financial goals. In exchange for your premium payment, the insurance company provides you income, either starting immediately or at some time in the future. In addition, FIAs offer the potential for indexed interest based on changes in select indices.¹
Annuity Truths & Myths
WHY ARE THEY CALLED FIXED INDEX ANNUITIES?
Fixed – You can be guaranteed a minimum rate of return from your contract.
Index – Unlike traditional fixed annuities, fixed index annuities allows you to take advantage of market upside with interest credits based on changes in select indices, such as the S&P 500 or the DJIA.²
Annuity – An annuity is a contract between you and an insurance company. In exchange for paying an initial premium, the insurance company offers you regular income payments, either starting now, or down the road.
WHO IS INVOLVED IN FIXED INDEX ANNUITIES?
The Insurance Company issues the annuity and is responsible for backing its guarantees.
The Annuitant’s life expectancy is used to calculate payments; the Contract Owner makes decisions regarding the annuity. These may be the same person, or not.
The Beneficiary receives the death beneﬁt of the annuity. Without them, the annuity may be subject to probate. If beneﬁciaries are deﬁned, the proceeds will pass to them without probate.
HOW DO FIXED INDEX ANNUITIES WORK?
As soon as you purchase an annuity, it begins gaining interest. Interest is generated from the fixed rate set by the insurance company, or based, in part, on changes in any selected indices. This interest accumulates tax-deferred, which can help your assets grow more quickly. In addition, some contracts may include a Lifetime Income Benefit Rider for an additional fee, which determines how you receive payments during the Distribution phase. Be aware that interest crediting can be limited by features like caps, spreads and/or participation rates.
When you decide that it’s time to receive income payments, the distribution phase begins. You can choose to annuitize to take payments out on a set schedule, which can be adjusted to last you a lifetime. Alternatively, if you have purchased an income rider, you can take income withdrawals as an alternative to annuitization.
However, the income benefit is never available as a lump sum or cash surrender value. Whatever method you choose, fixed index annuities can help you feel more confident about your income in retirement.
Annuities are designed to meet long-term needs and are subject to surrender charges. Surrender charges or withdrawal penalties may result in a loss of credited interest and a partial loss of premium. Distributions are subject to ordinary income tax, and, if taken prior to 59½, a 10% federal penalty.
1. Fixed Index Annuities are not a direct investment in the stock market. They are long term insurance products with guarantees backed by the issuing company. They provide the potential for interest to be credited based in part on the performance of specific indices, without the risk of loss of premium due to market downturns or fluctuation. They may not be appropriate for all clients.
2. Although an external index may affect your contract values, the contract does not directly participate in any stock or investments. You are not buying bonds, shares of stock, or shares of an index fund. It is not possible to invest directly in an index. The market index value does not include the dividends paid on the stock underlying a stock index. These dividends are also not reflected in the interest credited to your contract. Indexed interest could be less than with a traditional product, and could be zero.