Benefits Safety & Guarantees Tax Deferral Lifetime Income Potential Growth Indexing Expectations ABCs of Annuities
It's Time To Rethink Retirement...
Over the past years, the financial markets have witnessed significant fluctuations, and coupled with the limited availability of traditional retirement options, such as defined benefit pension plans, Americans are facing an increased obligation to save for their future. To address this heightened responsibility, there is a growing need for financial solutions that can provide added protection for retirement savings.
At John Nunes Financial & Insurance Services, we offer a range of annuities with benefits from the industry's top insurance carriers. Whether your objective is to secure a guaranteed lifetime income, save for a specific retirement goal, or leave a legacy for your loved ones, our team can work with you to create a tailored plan that meets your retirement needs.
Benefits of a Fixed Indexed Annuity
Selecting an appropriate accumulation vehicle for retirement can present a challenge. With an abundance of options available, determining which product aligns with your objectives can be a daunting task.
On one hand, individuals may desire the security of principal and accrued interest guaranteed by a fixed-rate product. Conversely, many individuals may prefer the potential for higher interest gains that are linked to market performance--a benefit not offered by fixed-rate products.
In the past, retirement planning options were limited to either (1) selecting a product with a guaranteed principle and a minimum interest amount, or (2) assuming the risk of market-linked growth with the potential for higher returns, but also the risk of losing principal.
Fortunately, a solution that blends the benefits of both options is now available through the fixed index annuity concept. This innovative concept allows individuals to experience the guarantee of principal and the potential for market-linked growth, while avoiding any risk of principal loss due to market downturns. It is an excellent tool designed to help individuals achieve their retirement goals.
Safety and Guarantee of Principal
A Fixed Index Annuity (FIA), which is also known as an Equity Indexed Annuity, offers attractive features of a conventional fixed annuity - a secure principal guarantee. Unlike securities or mutual funds, which are subject to market fluctuations that may cause a decrease in the account balance, a Fixed Index Annuity ensures that the premium deposited will never decrease due to market downturns. Moreover, the contract holder of a Fixed Index Annuity has the opportunity to participate in market-indexed interest without experiencing market-type losses.
The Power of Tax Deferral
Annuity values accrue on a tax-deferred basis until the time of withdrawal, leading to accelerated growth due to the interest earned on the tax dollars saved. The principal amount invested attracts interest and experiences compounding, leading to a quicker accumulation of funds and a higher rate of return on investment.
In general, contracts for fixed index annuities provide for penalty-free withdrawals of up to 10% of the total accumulation value, on an annual basis, following the initial contract anniversary.
Guaranteed Lifetime Income
Investing in a fixed index annuity may offer you the opportunity to receive a reliable income stream, as this financial product guarantees a specific payment amount. Additionally, you can opt for various annuity payment plans, depending on your financial goals and preferences.
It's important to note that nonqualified plans provide an added benefit, as a portion of each annuity payment is considered a return of premium and, therefore, exempt from taxation. This feature can effectively reduce the income tax burden on your annuity payments.
Potential of Stock Market-Linked Growth
The indexed annuity concept shares many similarities with traditional fixed annuities, but it offers a distinctive feature that provides the potential for interest credits linked to the stock market without exposing the investor to any market-related losses. Unlike securities-based products or mutual funds that subject the investor to market risks, the fixed index annuity concept safeguards the contract owner from any potential loss of principal arising from market downturns.
What is Indexing?
A fixed index annuity is a financial product that offers returns based on the performance of certain indices that resemble the stock market. The underlying investment strategy of such indices is commonly known as indexing, which involves tracking the performance of selected securities, such as the Standard & Poor's 500® Index. This index comprises 500 industry leaders, making it a benchmark for U.S. stock market performance. By investing in a fixed index annuity, one can link their returns to the performance of such market indices, while avoiding direct exposure to stock or equity investments. Indexing provides a means for passive investment diversification, allowing one to partake in the market's potential gains while minimizing the risks of market downturns.
Expectations for the Fixed Indexed Annuity
Fixed index annuities offer the potential for market-linked interest rates without exposing the investor to market risk. The contract owners benefit from the principal guarantees and safety, while also being connected to market growth. However, it is important to note that fixed index annuities cannot precisely mirror the performance of any stock market indices.
Given that fixed index annuities utilize a passive investment strategy, it is not possible to achieve exact parity with stock market returns. Nevertheless, fixed index annuities are a powerful financial instrument intended to address long-term retirement needs.
If you are considering the use of a fixed index annuity in your financial planning, we encourage you to contact John Nunes Financial & Insurance Services today to obtain further information.
What Is An Indexed Annuity?
Watch to learn what makes a fixed index annuity different from other kinds of annuities, including principal protection from market downturns, additional accumulation potential through indexed interest, choices for retirement income when you're ready, and other features to consider.
Learn More About Lifetime Stream of Income
