Fixed Index Annuities
What Are Fixed Index Annuities?
If you are looking to protect your savings while also earning a decent rate of return that is linked to the market without directly investing in the market yourself, a fixed index annuity may be the perfect option for you.
A fixed index annuity is a long-term investment option that provides you with the benefit of a minimum guaranteed interest rate. This type of annuity offers more potential for growth as it is based on the performance of a stock market index or through a fixed rate of interest that is generated on a fixed account – or even both.
The benefits of a fixed index annuity are that it allows your assets to grow in a tax-deferred way. In addition, you also have the option of getting a guaranteed lifetime withdrawal benefit that offers financial protection to you and your spouse and which will grow each year that your income is deferred for up to 10 years.
The major difference between a fixed rate annuity and a fixed index annuity is in the crediting of excess interest above the minimum guarantee. Fixed index annuities are protected against the loss of principal amount, which means you won’t lose any money you put into this annuity.
Fixed Income vs. Variable Income Annuities
There are major differences between fixed annuities and variable annuities. A fixed annuity offers you a guaranteed payment for a specific amount of time written in the agreement. The beauty of fixed annuities is that its value does not fluctuate, offering you a reliable stream of income.
On the other hand, variable annuity offers you an income that is subject to market fluctuations, based on the value of the stocks or bonds backing the annuity assets. When you read or hear about annuities in the media, most of the time, the subject is VARIABLE annuities NOT FIXED annuities.
As such, unlike fixed annuities, the owner of the annuities bears more investment risks with variable annuities. These annuities are considered investment securities and are a “risk money place” rather than a “safe money place” for your funds.
