Indexed Annuities:
An Overview
Keep reading to see how you can maximize your retirement with this safe form of investment.
Hey it’s Bryan here, many people keep asking me about indexed annuities, so I decided to put together this guide that covers pretty much everything about them. Also, I’m going to provide an overview of indexed annuities and answer common questions about this type of financial product.
What’s an Indexed Annuity?
Let’s start off by saying that indexed annuities are designed to secure a steady income source when you retire. Simply put, an indexed annuity is a product that is linked to a market index, for example Nasdaq, to generate returns. It works like this: you invest your money with an insurance company and, when you retire you get a steady income. Or you can get the lump sum of it whenever it’s specified in the contract. Indexed annuities are also called fixed indexed annuities, and they provide a guaranteed interest rate.
How Annuities Work:
Annuities work in different ways. However, the most common is that an insurance company will invest your payments and accumulate them over time. Your payments can have a duration of 10 to 30 years. When it’s time to get your money back, the insurance company will pay regular distributions for a predetermined period, or lifetime. One cool thing is that you can make payments with pre-tax dollars and only pay income tax when you receive your money.
How do insurance companies cover the risk involved?
Easy. They charge fees.
How do insurance companies cover the risk involved? Easy. They charge fees. They may also offer riders to customize the annuity’s conditions and may impose penalties for early withdrawal of funds. As I have mentioned in other articles, it’s important to carefully review the terms, fees, and penalties associated with an annuity contract and not make any hasty decisions, because there are a lot of thieves out there, as I’ll discuss later on.
Yields
Yields will vary depending on your contract and you should consider:
- Current Interest rates: If the interests are high, your participation will be high. If they are low, your participation will be low.
- Participation rate: This one depends on the gain in the stock index. Let’s say, if the participation rate is 50 percent and the index gained 10 percent, the annuity would be credited with 50 percent of the 10 percent gain, or 5 percent.
- Margin fee: This is an additional participation fee.
Pros and Cons of Indexed Annuities
Pros of Indexed Annuities
-
Tax-deferred growth
-
Potential for increased value
-
Preserve your purchase power over time
-
Your principal investment remains intact
-
You benefit from positive market performance
-
Competitive rate
Cons of Indexed Annuities
-
Capped gains
-
Fee transparency
-
Dishonest Brokers
-
Decreasing value cap
-
Surrender charges
-
Fixed income payments
Pros:
- Tax-deferred growth: Like other annuity types, indexed annuities offer tax-deferred growth, which means that your annuity can grow faster over time.
- Potential for increased value: When the stock market performs well, indexed annuities tied to specific indexes can experience an increase in value.
- Preserve your purchase power over time: With the inflation hedge there are additional yields generated by indexed annuities that can serve as a hedge against inflation.
- Your principal investment remains intact: If the stock market underperforms, indexed annuities provide a measure of downside protection. Even if the market experiences losses.
- You benefit from positive market performance: When the index linked to your annuity does well, the gains are typically locked in, guaranteeing that you get gains from the positive market performance.
- Competitive rates: Indexed annuities often offer better rates of return compared to traditional investment options like certificates of deposit (CDs).
Cons:
- Capped gains: The gains on your contract are often subject to a cap. This means that you won’t fully benefit from the entire increase in the value of the underlying stocks or index.
- Fee transparency: Some indexed annuities may have hidden fees.
- Dishonest Brokers: Immoral people who charge an immoral commission.
- Decreasing value cap: Sometimes the cap on increasing values in indexed annuities may decrease in the later years of the contract. In other words, the percentage of gain you can receive from the index value may decrease over time.
- Surrender charges: Indexed annuities often impose steep surrender charges for early withdrawals.
- Fixed income payments: Indexed annuities provide fixed income payments. The amounts are set and generally do not change throughout the contract’s duration.
This is where content goes for landing pages
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Proin pulvinar non magna at pellentesque. Donec convallis ex ac erat efficitur tempor. Aenean a commodo nunc, et suscipit urna. Vivamus egestas metus a ante laoreet convallis. Duis ac massa diam. Vestibulum eu neque libero. Integer viverra, velit eu semper consequat, metus nulla placerat odio, ac semper diam justo non elit. Donec vitae auctor erat. Donec gravida interdum ligula, commodo lacinia sem ultrices eu. Cras tincidunt molestie arcu id faucibus. Praesent tempus quis libero at cursus. Cras et nunc vel nunc venenatis consequat.
In faucibus odio in ante dignissim mattis. Sed bibendum cursus convallis. Pellentesque imperdiet mauris eget ipsum aliquam, nec rhoncus neque fringilla. Duis ultrices massa at purus cursus feugiat. Aliquam molestie justo ut mi dapibus dapibus. Donec porttitor sem ipsum, maximus laoreet diam feugiat id. In hac habitasse platea dictumst. Donec feugiat pulvinar enim nec suscipit. Nunc hendrerit purus ut auctor interdum. Pellentesque erat mauris, vehicula ut pharetra vel, vehicula a diam. Vivamus ligula lectus, tincidunt quis justo eget, laoreet pulvinar purus. Nullam sit amet viverra purus, sit amet facilisis nulla. Nullam et ullamcorper ipsum, at cursus mi. Quisque nibh turpis, ullamcorper non elit eget, ultricies condimentum nulla. Suspendisse ac nisi nec magna pretium tincidunt.
Donec sed convallis diam. Pellentesque quis faucibus justo. Nulla tristique turpis purus, sed auctor ligula ultricies sed. Duis ullamcorper ex quam, non varius leo semper eget. Praesent tellus ligula, eleifend et fermentum sit amet, malesuada at quam. Praesent eu tristique lacus. Aenean pharetra tellus scelerisque tellus cursus tincidunt. Aliquam at purus ac felis dignissim vehicula. Cras consectetur ut ante efficitur vulputate. Integer bibendum leo in viverra auctor. Fusce hendrerit convallis varius. Aenean aliquet viverra metus, sit amet tristique leo posuere at. Curabitur et libero ligula. Donec non diam pulvinar, pretium eros vel, tempus metus. Vestibulum sit amet turpis tortor.
Aenean vitae justo id lorem blandit bibendum. Vivamus sit amet tempor mauris. Pellentesque tortor nisl, varius sed lectus pharetra, lacinia porttitor arcu. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. Donec in orci tortor. Praesent condimentum dictum ipsum ut facilisis. Aliquam feugiat, dui vitae elementum condimentum, augue dui ornare lorem, vehicula vehicula ex elit et elit. Pellentesque sed augue nec justo ornare placerat at dignissim massa. Integer sed cursus urna. Suspendisse vel mollis erat, quis commodo velit. Praesent et turpis ac tellus condimentum sagittis nec a augue.
Maecenas lacus enim, finibus eu mattis nec, consectetur non ex. Aenean dapibus sem fringilla massa convallis, in consectetur diam porttitor. Curabitur sit amet laoreet est. Nulla dictum venenatis lacus, ut maximus nisi gravida quis. Ut sagittis, ex quis gravida volutpat, felis enim mollis nisl, a bibendum risus risus sed eros. Pellentesque blandit posuere nibh vitae tempus. Donec sit amet libero vel urna sollicitudin malesuada. Aliquam sit amet elementum nisl. Mauris sit amet sagittis metus, eu congue massa. Sed non neque nibh. Vestibulum ante ipsum primis in faucibus orci luctus et ultrices posuere cubilia curae; Donec ultrices turpis sit amet est blandit sodales. Nunc euismod sagittis risus, et ullamcorper orci blandit et. In ex ligula, faucibus sed diam sit amet, dapibus placerat nulla. Mauris vel ligula et massa scelerisque accumsan ut non nulla.
Curabitur id dapibus nisl, eget laoreet velit. Quisque ut tempor risus. Quisque ullamcorper libero ac egestas pharetra. Etiam id lobortis sem. Ut nulla arcu, pulvinar et iaculis ut, tincidunt eu leo. Ut lacinia rutrum massa id fermentum. Mauris mattis odio ac laoreet rhoncus. Quisque vel cursus lectus. Duis quis enim eget mauris auctor convallis sit amet quis arcu.
Aenean et tristique lorem. Curabitur consequat efficitur mauris eu vestibulum. Aliquam erat volutpat. Cras faucibus odio eu urna ornare, nec cursus sem condimentum. Morbi porta ipsum eu pharetra gravida. Pellentesque mattis metus sed quam dictum, sit amet iaculis sapien cursus. Quisque lorem odio, condimentum quis nunc sit amet, mollis facilisis nunc. Maecenas non convallis arcu, non iaculis sem. Cras auctor, tortor vitae lobortis rutrum, quam libero pharetra elit, a lobortis turpis justo vel magna. Nulla odio dui, rutrum sed tellus porttitor, mollis ornare neque.
Praesent eget orci quis sem semper varius ac id justo. Duis lobortis, felis tempus feugiat consequat, ex diam posuere nulla, nec cursus mi diam sed lorem. Etiam sit amet hendrerit ligula. Donec nibh massa, convallis in eros quis, interdum sagittis nisl. Nam at sem nulla. Suspendisse non condimentum mi, et mollis metus. Aenean enim mi, volutpat et mattis id, ullamcorper nec eros. Proin ut mauris id magna sollicitudin luctus nec sit amet leo. In vestibulum, nunc nec mattis ullamcorper, est mauris iaculis justo, et consequat ligula massa at mauris. Duis pharetra fermentum viverra.
Donec eget consectetur dolor. In in ultrices arcu. Cras sit amet ex a est tempus tristique. Pellentesque sit amet suscipit nunc. Morbi vestibulum eros eget quam auctor egestas. Mauris euismod fermentum magna ac lacinia. Mauris vel sapien posuere, tristique elit non, semper nibh. Nullam pretium purus non orci bibendum aliquam. Proin posuere eu tellus ac ultricies. Proin molestie sollicitudin ex, sed vulputate massa vulputate et. Phasellus ut metus tincidunt, malesuada risus tincidunt, rhoncus urna. Mauris porttitor fringilla ornare.
Nam aliquet augue ac laoreet eleifend. Mauris lobortis vitae sem at egestas. Integer vehicula velit eros, quis laoreet elit iaculis vitae. Cras sodales tortor quis enim sagittis elementum. Aliquam vel nisl orci. Sed sed erat vitae erat placerat vestibulum vel vitae elit. Pellentesque sed mi vel ligula placerat sodales in nec risus. Integer maximus mattis erat non viverra. Donec auctor interdum ante, vulputate elementum massa.
Vestibulum sed ex sit amet urna dignissim luctus sit amet non diam. Curabitur quam neque, tincidunt a rhoncus non, tincidunt quis orci. Curabitur placerat suscipit tortor a pharetra. Duis tristique ante sit amet arcu mollis, consequat vulputate dolor scelerisque. In hac habitasse platea dictumst. Cras quis sagittis magna, vel tempus velit. Interdum et malesuada fames ac ante ipsum primis in faucibus.
Suspendisse eget congue eros, non pharetra ligula. Etiam condimentum lacinia arcu id aliquet. In auctor eget nulla vitae euismod. Donec posuere diam nec pretium eleifend. Suspendisse laoreet commodo ante, vel accumsan velit viverra eu. Nullam ultricies eros blandit justo efficitur, non pretium orci vestibulum. Vivamus interdum, libero nec auctor semper, ante risus consectetur odio, at posuere eros quam ut mi. Mauris ut eros in ipsum placerat molestie. Donec a libero eget urna tempus imperdiet vel id sem. Suspendisse potenti. Morbi facilisis leo et nibh pharetra consectetur. Sed sapien lectus, ullamcorper ac dictum vel, auctor in ipsum. Pellentesque vel dignissim nisi. Nulla commodo pretium velit. Vestibulum tristique enim quis eros condimentum bibendum a quis magna.
Donec et aliquet felis. Suspendisse pellentesque sagittis mauris, quis accumsan enim egestas nec. Etiam ac faucibus ante. Donec cursus condimentum est, non imperdiet ligula pretium id. Curabitur vel sollicitudin ligula. Ut finibus sit amet dui ut malesuada. Praesent ultricies diam vel viverra eleifend. Pellentesque a egestas tortor, eget tristique lectus. Donec non augue tellus. Pellentesque pulvinar ipsum id eleifend egestas. Praesent quis ex tellus.
Aliquam iaculis ex ac lectus lacinia, imperdiet scelerisque eros pharetra. In hac habitasse platea dictumst. Mauris ac risus vel nibh consectetur eleifend. Praesent laoreet sem a commodo ornare. Cras non commodo tortor. Mauris facilisis risus sit amet mollis porta. Duis dapibus velit finibus erat lacinia maximus. Nulla egestas mi a finibus efficitur. Duis iaculis quam consequat, fringilla massa non, placerat nunc. Integer a ornare lacus. Donec quis nibh in diam efficitur tempus. Suspendisse a est ligula. Aliquam et ipsum sed ante interdum auctor. Curabitur interdum lacus lacus, eget lobortis augue condimentum posuere. Suspendisse sodales tortor diam.
Morbi pulvinar, nulla et vehicula auctor, libero diam consectetur enim, eget fringilla mi metus in mauris. Nulla ac ullamcorper ligula, a venenatis ante. Duis consequat purus sagittis imperdiet dignissim. In dignissim, odio eget blandit maximus, arcu tortor lacinia tortor, id sagittis eros arcu ac erat. Duis ex enim, pellentesque non diam eget, imperdiet lacinia ligula. Maecenas nec dictum velit, sed porta urna. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. Mauris ut feugiat libero.
Suspendisse cursus quam turpis, ac condimentum nisi bibendum sed. Donec vestibulum sem ac nisl semper, in scelerisque turpis volutpat. Mauris aliquet sagittis arcu, sagittis scelerisque urna. Nulla tristique vulputate interdum. Etiam augue turpis, maximus condimentum vestibulum quis, tempor in erat. Curabitur nulla urna, molestie a luctus eu, luctus vel lorem. Suspendisse tincidunt erat id odio aliquet sagittis. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Maecenas tempus pulvinar sodales. Nam nibh lacus, aliquet nec mi quis, fermentum tempor odio. Suspendisse vel malesuada dui, ut eleifend felis. Duis non est eget leo venenatis pulvinar sit amet non tortor.
Duis placerat, lacus quis convallis bibendum, mauris metus pretium augue, id venenatis orci lacus sit amet est. Vestibulum et elit convallis, hendrerit quam et, pharetra orci. Vivamus suscipit magna arcu, sit amet pharetra magna interdum eu. Nullam vitae augue ac nisi mattis varius. Nam at arcu sit amet lacus convallis faucibus. Mauris congue vestibulum libero at auctor. Vestibulum ac pharetra dolor.
Etiam tellus tellus, aliquet at odio eget, porttitor posuere diam. Morbi hendrerit est at eros convallis fringilla. Duis ac lacus ultricies, mattis nisl ut, cursus libero. Donec mollis eleifend felis, vitae faucibus ipsum convallis in. Aliquam dictum, ante ut accumsan luctus, dolor erat imperdiet nisi, sed tincidunt massa mauris non felis. Vestibulum viverra ornare metus, et ornare velit consectetur eu. Proin id tempor elit. Proin varius odio a odio rutrum placerat. Morbi sed eros eu lectus rutrum accumsan ac nec risus. In hac habitasse platea dictumst. Nullam consectetur vehicula mauris, in eleifend tellus consectetur nec. Duis eleifend velit id sem suscipit, vel scelerisque nisi pellentesque.
Morbi in mauris eu lectus dictum ornare ac a erat. Vivamus et orci turpis. Ut vulputate ullamcorper leo. Sed ut nisi vestibulum, rutrum purus sit amet, tempus nisi. Mauris euismod, nisl sed sodales elementum, est velit tincidunt sapien, eu volutpat elit tellus a lectus. Sed bibendum sapien elit, in tristique arcu vestibulum in. Fusce et sollicitudin mi. Nullam varius ut augue ut iaculis. Nulla tincidunt vel urna quis gravida. Suspendisse eu facilisis enim.
Duis tincidunt blandit quam. Pellentesque efficitur sapien ut massa commodo iaculis cursus a leo. Curabitur at efficitur diam. Fusce eu cursus lorem. Cras dapibus in est dignissim accumsan. Duis vitae nisi eros. Vivamus id auctor dolor, et elementum arcu.