Different Indexed Annuities
Fixed Index Annuity (FIA)
Searching for a fixed index annuity? A fixed index annuity, also called an equity indexed annuity or FIA, provides investors with choices of a guaranteed rate of interest that is often higher than bank CDs, and/or offers a return from a specific stock market index (i.e.: such as the S&P 500, Dow Jones, NASDAQ,etc.).
Equity Indexed Annuity
We here are dedicated to educating and finding every one of our clients the absolute best fixed index annuity.
In 2012, fixed indexed annuities sold $25.7 billion (up 4.5% from last year) due to the safety of the investment and uncertainty of the stock market. 2013 looks to be another banner year for fixed index annuities.
A good analogy of a fixed index annuity is the casino example. In this analogy, the investor has two options:
1. The investor can choose to play at a blackjack table where if the investor wins, they will receive 100% of their initial investment. However, if they lose, they will lose 100% of their initial investment. This blackjack table is comparable to the stock market.
2. The other choice is a blackjack table where if the investor wins, they will receive 60 to 70 percent of their initial investment. However, if they lose, they will get back all of their initial investment. In other words, there is no risk at this blackjack table. This blackjack table is comparable to the fixed index annuity.
Here are some common features in the best fixed index annuity:
No market risk: A Fixed Index Annuity (FIA) owner can never lose money due to a down market. Most if not all FIAs today guarantee your principal, lock in gains from previous years, and provide a guaranteed minimum annual rate of return (usually 2-3%) on that total. During a year of growth, FIA owners participate in a portion, typically 55 to 80%, of those gains, via linkage to the published returns of the various equity indices (the S&P 500, NASDAQ 100, DJIA, Russell 2000, etc.). During a subsequent down year, an FIA owner’s principal and accumulated gains are “locked in” and carried forward (also known as “annual reset”) to his/her next contract anniversary. If the markets should recover the following year, the FIA owner would again participate in a portion of those gains without having to climb out of the previous year’s correction.
FIAs enjoy Triple compounding: When dealing with the best fixed index annuity rates, you earn interest on your initial and growing principal, you earn interest on your interest, and you earn interest on the money you would otherwise have paid in taxes on both. If your fixed index annuity came with a first-year premium bonus, you would have benefited from quadruple compounding, having earned interest on that premium bonus as well.
FIAs are Tax deferred: The best equity indexed annuities grow tax-deferred until interest is withdrawn, thus allowing their owners to control precisely when and how much money will be taxable to them, depending upon their needs and circumstances from one year to the next. Annuities are not subject to state and local income taxes during their accumulation phase. The growth within an Annuity is tax deferred until taken as income, and the annuity owner is in control of his or her reportable income, thus enabling them to reduce or even eliminate the taxation of their Social Security benefits.
Most equity indexed annuities will double an owner’s penalty-free access to cash from their annuity, often waiving any remaining surrender penalties when such individuals suffer a serious illness, need at-home care, or become confined to a nursing home. The best equity indexed annuity rates will provide higher than bank interest rates and may provide basic as well as enhanced death benefits to the beneficiaries of the owners, and neither the owner nor the beneficiary can ever lose money due to a down market. Mutual funds provide no such guarantees or death benefits of any kind. Annuities allow the tax-free exchange of one contract for another. A Fixed Index Annuity owner may exchange their annuity for a completely different annuity without triggering income taxes.
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