Annuities:
Benefits of Fixed Indexed Annuities
Benefits of Fixed Indexed Annuities
There are numerous benefits of fixed indexed annuity (FIA) income in retirement. With an FIA, you can protect the money you’ve worked hard to save. It also allows you to receive a reasonable rate of return** based on the performance of an index. The insurance company protects your money, even in the event of a stock market drop. However, while the market is rising, you may receive additional interest. For many retirees, an FIA is a stable source of income that increases their confidence in their retirement strategy. Could it be right for you? Reach out to us to learn more.
Crediting Method
When purchasing an FIA, you choose an index or indexes to contribute to the annuity’s value. You can also choose which crediting method to utilize. For example, you may select a monthly or annual crediting method. Some crediting methods take an average of value over a period of time. Others, however, base interest on the difference in rates over time. Alternatively, the crediting method could be based on the change in the index front since the first-anniversary contract date.
What Affects Interest Rates
It’s important to examine the various factors that impact the interest rate on your FIA. These include:
- The cap is a ceiling on the amount your FIA can earn during a certain period. If your chosen index increases over the cap, the cap is instead used to calculate your interest.
- The participation rate is used to measure your interest rate, and is typically implemented after the cap but before a spread.
- With a spread, the index deducts a percentage of interest over a certain amount of time. For example, if the spread is 4% and the index increases by 9%, the annuity would get a 5% interest credit.
