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Fixed Indexed Annuities – Is One Right For You?

Guaranteed Lifetime Income Riders

It’s What You Keep That Counts

If you knew that you would never lose your money due to market risk, what type of investment would you choose? The fact that you are exempt from a market loss would free you of the worry of concern about any investment; you would merely choose a category that potentially had the greatest growth.

Fear of loss can result in fear of action; if the fear is removed, action would be the next logical step. Action without fear of loss would be a terrific investment plan.

There is a big lie that is often told to investors, and the lie says this: “Over time, the stock market always rebounds.” If that were true (in fact it is) then just put all your money in the stock market, right?

Even during the market turmoil between 1999 and 2008, the general direction of the stock markets as seen in the S&P 500 is positive.

Therein is the truth of the lie, the stock market has always grown (over a period of time) but what happens when you might need your funds and the market is in a downturn? How do you protect yourself against market downturns?

How do you invest without fear of market loss?

Most financial planners and those well trained in investing will answer that question using a more complicated variable. Their answer is normally that the portfolio contains a mixture of stocks and bonds. Stocks for growth and bonds for stability. The general plan is as you age, you reallocate your portfolio to a higher percentage of bonds (stability) and lesser percentage in stocks (growth).

There is an old saying about investing, “Never underestimate the power of zero.” That means simply that if you never had to fear market loss, the power of earning zero is a win, no losses means no fear.

If you could invest your important money in an account that had the following two guarantees would you do it?

  • You can never lose any of your money due to market losses
  • You will always have a minimum guaranteed rate of growth in your account

Of course this guaranteed plan has one small restriction, your growth yield has a limit. In return for no exposure to market risk, you have to give up part of the market growth. Would that be fair? Would you take that deal?

Fixed Indexed Annuities – Is One Right For You?

The single fastest growing segment of the annuity industry is Fixed Indexed Annuities (FIA). A recent report stated that a FIA will be the most popular choice for Baby Boomers entering retirement. So what are Fixed Indexed Annuities?

Fixed Indexed Annuities are really fixed annuities who use a different method for determining interest crediting rates.

It is easy to become confused with the term “indexed” but the explanation is really quite simple. It means that your actual annual yield (interest earned) is tied to an independent third party source, such as the Standard and Poor’s 500 Stock Index (S/P 500). Your funds are NOT invested in the stock market; they are on deposit with the insurance company who issued the annuity.

What exactly is indexing? Indexing is simply an investment strategy that follows the performance of select securities, such as the S&P 500. It is a collection of 500 American stocks which help measure the overall performance or benchmark of the US economy.

Think of it this way, you are outsourcing the yield for your annuity, trusting a third party instead of taking what an insurance company decides to credit you. It is really a hand off approach that uses an outside source to determining yields, a disinterested third party.

FIA’s are not for everyone and I will let you in on a little secret, your actual yields will not mimic the actual results of the S/P 500, your actual yields will be a percentage of the actual return. Is that fair? Yes, it is because for that reduced return you will never be exposed to any risk of market loss.

Your funds are fully guaranteed against market risk.

Guaranteed Lifetime Income Riders

Income Can Be King

When it really comes down to it, in our lives, having enough income at retirement becomes vitally important, it becomes king. Having enough income will help us reduce stress in our lives. How you accomplish the income goal can be tricky. Should you invest in bonds? US Treasuries? The stock market? The banks?

Reality can be a harsh term when the time comes to enjoy your retirement years. Decisions are difficult; who and what do you trust with your important retirement funds?

One thing is for sure, income is the goal for most of us and income that is always there for us is essential. Income we cannot outlive. Income that will never stop no matter how long we live.

We fortunately have a wonderful option to select for our retirement, an option that has only benefits and no market risks, an option that doesn’t cost an arm and a leg, an option that provides us with income for the rest of our lives.

That option comes in the form of a fabulous new product evolution called:

Guaranteed Lifetime Income Riders.

An income rider is an addition to a fixed annuity, it sits on top of the annuity and provides additional benefits for the annuitant, and an income rider enhances the annuity. Income riders are innovative, dynamic and evolving.

A guaranteed lifetime income rider provides benefits that can help anyone retired or wishing to be by eliminating the one thing we all fear:

Market Risk.

By the way, another term often used to explain a Guaranteed Lifetime Income Rider is Sleep Insurance: Fixed annuities with Guaranteed Lifetime Income Riders are a way to sleep better, because the stress of worrying about money and outliving your income is put to “sleep.”