Index Interest Potential
Fixed Index
Annuity Rates
Are there choices in retirement you may not be aware of? Contrary to what you may think, the word “fixed” may actually have flexibility when it comes to fixed index annuity rates.
Fixed Index
Annuity Rates
FIAs may provide some choice. For example, you may have choices in terms of which index you want. The index is not a stock market purchase. Instead, it is an external index which may offer potential fixed index annuity rates. You choose an index or multiple indexes. In addition, you may also decide how much of your money will link with certain indexes.
Another choice FIA buyers may have is the crediting method. Basically, each insurance company lays out how they will calculate the potential index interest on their products. Crediting method may use an average value and look at the value over a period of time. Or, some may look at various rates over time. In addition, an FIA might have an anniversary contract date. On this date, the owner may receive any potential fixed index annuity rates.
Rule Number One:
Don't Lose
Keep in mind, an FIA has a conservative benefit. Namely, you can have a place to protect your savings. Let’s say you happen to choose an index which decreases. With an FIA, this would not cause you to lose money. Instead, the insurance company must keep up their contract terms and be able to pay out the policy amount. Of course, this occurs after a period of accumulation.
Therefore, you may be able to see some increase in your fixed index annuity rates. Yet, if you do not, your principal does not go down. When you are able to keep your money instead of losing it, you are following rule number one.
Growth Potential: Is that possible?
Growth is a term that is usually just for securities and investments.
Because an FIA is not an investment nor a security, the terms we use are a little different. FIAs offer potential indexed interest, over time. The calculation you use for this depends upon the product you have. Usually, you may select an index or several indexes that will align with your annuity. To help you know your options, Safe Retirement Solutions may meet with you to review some choices. Then, the insurance company will report on how the index or multiple indexes are performing. If there is an increase in that index, you may see some potential increase in the fixed index annuity rates.
After the rate goes higher than a certain level, you may see that potential indexed interest on your account, over time. But, if the index drops, your principal does not. Participation rate, caps, and spreads can also impact this potential credit. Each retiree has a different situation. Therefore, your choices about your FIA or other annuities may be different. If you choose to meet with Safe Retirement Solutions, we can help walk you through some of these details.
Want to find out more information? Join us at one of our seminars.
Can Potential Indexed Interest Change?
Here are a few things to know about FIAs and some terms that may affect how your potential indexed interest changes depending upon your policy terms:
Here, a percentage of the increase of the index rate is subtracted from a pre-set rate. For instance, a 4% spread might come out of a 9% increase. In that case, there is a potential 5% credit.
Just like it sounds, a CAP puts a lid on the amount of potential indexed interest an FIA may receive. Usually this is a one-month or one-year time frame. You have the benefit of not losing principal. However, you may not see the full increase that the index did. In other words, it is a trade-off.
Sometimes your FIA might only get a portion of the index increase. Each policy will outline what its participation rate is.
Of course, different types of annuities may be suitable for only certain situations. Reach out if you’d like to learn some of your potential options.
