Fixed- Index Annuities:

Protect your principal. Guarantee future income.

When you set aside money into your retirement all that money is not necessarily guaranteed to be there when you go retire. That's because this kind of account is attached directly to the performance of the stock market, making it more volatile. If you're looking for a way to protect your principle while you still build a guaranteed source of future income then you may consider a fixed-index annuity. 

A fixed-index annuity is a tax- deferred long-term savings option that guarantees a future payout while protecting principal. This  contract with the insurance company guarantees your return on investment while also offering possible gains. 

Structuring a fixed-index annuity: 

1. Lump-sum payment: You pay the insurance company a lump-sum payment or a series of installments. 

2. pick a stock market index to determine your interest rate - an index is a portfolio of investments, which represents a sector of the financial market. The value is derived from the prices of the underlying investments. 

(ex: S&P 500 or Dow Jones) 

Each month you compare the market-index value to the previous month. If there's a growth, you earn interest. If the index value goes down, you don't lose money. You don't receive interest. At the end of the year the monthly changes applied to your account are accrued in value. 

Index Vs Stock Market.

Unlike investing in the stocks and buying shares and possibly experiencing losses, market-indexes are a less risky way to still take advantage of some of the upward motion of the overall markets.

3. Pay attention to the participation rate on your policy. This is the amount of principle that will go towards interest-building index accounts.  

4. You earn interest based on the performance of the index you choose. if the index goes down your principal is guaranteed. You won't lose it. 

Pay attention to the Cap rate- this is the maximum interest rate that can be credited to the annuity. In exchange for not being exposed to less risk than traditional investments you agree to a capped rate of return.

5. This account is tax-deferred unless you withdraw early. If you move money from your Roth-IRA or 401K to fund the account fees may apply. 

6. Decide your payout structure and terms: Will it be immediate or in the future? A a lump sum or monthly/ annual payouts? 

Who might consider a fixed-index annuity? 

People who want to grow their money, tax-deferred while protecting the money they put in from losses. 

Older people, getting toward retirement age, who want to protect their money from losses while still earning on market gains. 

Contact an agent now or start a chat to get more information on how to structure a fixed-index annuity to meet your personal financial goals.